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                       AMENDED AND RESTATED LOAN AGREEMENT

                          DATED AS OF DECEMBER 1, 2005

                                      AMONG

                       BOWATER FUNDING INC., AS BORROWER,

                   BOWATER INCORPORATED, AS INITIAL SERVICER,

                   THE LENDERS FROM TIME TO TIME PARTY HERETO,

             SUNTRUST BANK AND WACHOVIA BANK, NATIONAL ASSOCIATION,
                                 AS LC ISSUERS,

           SUNTRUST CAPITAL MARKETS, INC. AND WACHOVIA BANK, NATIONAL
                           ASSOCIATION, AS CO-AGENTS,

                                       AND

             SUNTRUST CAPITAL MARKETS, INC., AS ADMINISTRATIVE AGENT








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                                TABLE OF CONTENTS

                                                                           PAGE

ARTICLE I. DEFINITIONS........................................................2

Section 1.1       Defined Terms...............................................2
Section 1.2       Other Definitional Provisions..............................26
Section 1.3       Other Terms................................................26
Section 1.4       Computation of Time Periods................................26
Section 1.5       Continuance of Significance Events.........................26

ARTICLE II. COMMITMENTS, BORROWING AND LETTER OF CREDIT
                    PROCEDURES AND LENDER NOTES..............................26

Section 2.1       Commitments................................................26
                           (a)      Advances.................................26
                           (b)      Issuance of Letters of Credit............27
Section 2.2       Borrowing Procedures.......................................27
Section 2.3       Funding....................................................27
Section 2.4       Letters of Credit..........................................28
                           (a)      Letter of Credit Requests................28
                           (b)      Reimbursement by Borrower................28
                           (c)      Obligations Absolute.....................29
                           (d)      Actions of LC Issuers....................30
                           (e)      Participations...........................30
                           (f)      LC Issuer Agreements.....................30
Section 2.5       Representation and Warranty................................31
Section 2.6       Extension of the Committed Lenders' Commitments............31
Section 2.7       Voluntary Termination of Committed Lenders' Commitments;
                                        Reduction of Facility Limit..........32
Section 2.8       Notes......................................................32

ARTICLE III. INTEREST, FEES, ETC.............................................32

Section 3.1       Interest Rates.............................................32
Section 3.2       Interest Payment Dates.....................................33
Section 3.3       Applicable Interest Rates..................................33
Section 3.4       Fees.......................................................33
Section 3.5       Computation of Interest and Fees...........................33

ARTICLE IV. REPAYMENTS AND PREPAYMENTS; DISTRIBUTION OF COLLECTIONS..........34

Section 4.1       Repayments and Prepayments.................................34

                                       ii
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Section 4.2       Application of Collections.................................34
Section 4.3       Application of Certain Payments............................36
Section 4.4       Due Date Extension.........................................36
Section 4.5       Timing of Payments.........................................36
Section 4.6       Release of Excess Cash Collateral..........................36
Section 4.7       Payments Rescission........................................36

ARTICLE V. SECURITY INTEREST.................................................37

Section 5.1       Grant of Security..........................................37
Section 5.2       Administrative Agent Appointed Attorney-in-Fact............38
Section 5.3       Administrative Agent May Perform...........................38
Section 5.4       Release of Collateral......................................38

ARTICLE VI. INCREASED COSTS, ETC.............................................39

Section 6.1       Increased Costs............................................39
Section 6.2       Broken Funding Costs.......................................40
Section 6.3       Withholding Taxes..........................................40

ARTICLE VII. CONDITIONS TO BORROWING.........................................41

Section 7.1       Initial Loan...............................................41
                  7.1.1    Resolutions.......................................41
                  7.1.2    Consents, etc.....................................41
                  7.1.3    Incumbency and Signatures.........................41
                  7.1.4    Good Standing Certificates........................41
                  7.1.5    Financing Statements..............................42
                  7.1.6    Search Reports....................................42
                  7.1.7    Fee Letters; Payment of Fees......................42
                  7.1.8    Receivables Sale Agreement........................42
                  7.1.9    Opinions of Counsel...............................42
                  7.1.10   Lender Notes......................................43
                  7.1.11   Borrowing Base Certificate........................43
                  7.1.12   Lock Box Account Agreements.......................43
                  7.1.13   Releases 43
                  7.1.14   Performance Undertaking...........................43
                  7.1.15   Other    .........................................43
Section 7.2       All Advances...............................................43
                  7.2.1    No Default, etc...................................43
                  7.2.2    Borrowing Request, etc............................43
                  7.2.3    Commitment Termination Date.......................43
                  7.2.4    Accounts 43

ARTICLE VIII. REPRESENTATIONS AND WARRANTIES.................................44

Section 8.1       Existence and Power........................................44
Section 8.2       Power and Authority; Due Authorization, Execution
                                and Delivery.................................44

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Section 8.3       No Conflict................................................44
Section 8.4       Governmental Authorization.................................44
Section 8.5       Actions, Suits.............................................44
Section 8.6       Binding Effect.............................................45
Section 8.7       Accuracy of Information....................................45
Section 8.8       Margin Regulations; Use of Proceeds........................45
Section 8.9       Good Title.................................................45
Section 8.10      Perfection.................................................45
Section 8.11      Places of Business and Locations of Records................46
Section 8.12      Accounts...................................................46
Section 8.13      No Material Adverse Effect.................................46
Section 8.14      Names......................................................46
Section 8.15      Ownership of Borrower; No Subsidiaries.....................46
Section 8.16      Not a Holding Company or an Investment Company.............46
Section 8.17      Compliance with Credit and Collection Policy...............46
Section 8.18      Solvency...................................................47
Section 8.19      Eligible Receivables.......................................47
Section 8.20      Sales by BAI...............................................47

ARTICLE IX. COVENANTS OF BORROWER AND SERVICER...............................47

Section 9.1       Affirmative Covenants......................................47
                  9.1.1    Compliance with Laws, Etc.........................47
                  9.1.2    Preservation of Legal Existence...................47
                  9.1.3    Performance and Compliance with Receivables.......47
                  9.1.4    Credit and Collection Policy......................47
                  9.1.5    Reporting Requirements............................48
                           (a)      Financial Statements.....................48
                           (b)      Monthly Reports and Borrowing Base
                                        Certificates.........................49
                           (c)      Significant Events.......................49
                           (d)      Servicing Certificate....................49
                           (e)      Procedures Review........................49
                           (f)      Other....................................50
                  9.1.6    Use of Proceeds...................................50
                  9.1.7    Separate Legal Entity.............................50
                  9.1.8    Adverse Claims on Receivables.....................51
                  9.1.9    Further Assurances................................52
                  9.1.10   Servicing.........................................52
                  9.1.11   Inspection........................................52
                  9.1.12   Cooperation.......................................53
                  9.1.13   Facility 53
                  9.1.14   Accounts 53
Section 9.2       Negative Covenants.........................................53
                  9.2.1    Sales, Liens, Etc.................................54
                  9.2.2    Mergers, Acquisitions, Sales, Subsidiaries, etc...54
                  9.2.3    Change in Business; Change in Credit and
                                Collection Policy............................54
                  9.2.4    Other Debt........................................54

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                  9.2.5    Organizational Documents..........................55
                  9.2.6    Jurisdiction of Organization; Location of Records.55
                  9.2.7    Financing Statements..............................55
                  9.2.8    Business Restrictions.............................55
                  9.2.9    Other Agreements; Performance Undertaking.........55

ARTICLE X. SIGNIFICANT EVENTS AND THEIR EFFECT...............................56

Section 10.1      Events of Default..........................................56
                  10.1.1   Non-Payment of Loans, Etc.........................56
                  10.1.2   Non-Compliance with Other Provisions..............56
                  10.1.3   Breach of Representations and Warranties..........56
                  10.1.4   Bankruptcy........................................56
                  10.1.5   Tax and ERISA Liens...............................56
Section 10.2      Amortization Events........................................57
                  10.2.1   Servicer Event of Default.........................57
                  10.2.2   Collateral Reporting.  ...........................57
                  10.2.3   Borrowing Base Deficit............................57
                  10.2.4   Default Ratio.....................................57
                  10.2.5   Dilution Ratio....................................57
                  10.2.6   Delinquency Ratio.................................57
                  10.2.7   Event of Default..................................57
                  10.2.8   Validity of Transaction Documents.................57
                  10.2.9   Termination Date..................................57
                  10.2.10  Performance Undertaking...........................57
                  10.2.11  Change of Control.................................58
Section 10.3      Effect of Significant Event................................58
                  10.3.1   Optional Termination..............................58
                  10.3.2   Automatic Termination.............................58
                  10.3.3   Notice to Rating Agencies.........................58
                  10.3.4   Cash-Collateralization of LC Obligations..........58
                  10.3.5   Additional Remedies...............................58
                  10.3.6   Italian Receivables...............................59

ARTICLE XI. THE SERVICER.....................................................59

Section 11.1      Bowater as Initial Servicer................................59
Section 11.2      Certain Duties of the Servicer.............................59
                  11.2.1   Authorization to Act as Borrower's Agent..........59
                  11.2.2   Servicer to Act as Servicer.......................59
                  11.2.3   Collections.......................................61
                  11.2.4   Settlement........................................63
Section 11.3      Servicing Compensation.....................................63
Section 11.4      Agreement Not to Resign....................................63
Section 11.5      Designation of Servicer....................................63
Section 11.6      Termination................................................63
Section 11.7      Servicer Events of Default.................................63

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                  11.7.1   Failure to Make Payments and Deposits.............63
                  11.7.2   Non-Compliance with Other Provisions..............63
                  11.7.3   Delegation........................................63
                  11.7.4   Breach of Representations and Warranties..........64
                  11.7.5   Bankruptcy........................................64
                  11.7.6   Judgments.........................................64
                  11.7.7   Cross-Default to Material Debt....................64

ARTICLE XII. AGENTS..........................................................65

Section 12.1      Authorization and Action...................................65
Section 12.2      Delegation of Duties.......................................66
Section 12.3      Exculpatory Provisions.....................................66
Section 12.4      Reliance by Agents.........................................67
Section 12.5      Notice of Significant Events...............................67
Section 12.6      Non-Reliance on Other Agents and Lenders...................67
Section 12.7      Indemnification of Agents..................................68
Section 12.8      Agents in their Individual Capacities......................68
Section 12.9      Conflict Waivers...........................................68
Section 12.10     UCC Filings................................................69

ARTICLE XIII. ASSIGNMENTS....................................................69

Section 13.1      Restrictions on Assignments................................69
Section 13.2      Documentation..............................................70
Section 13.3      Rights of Assignees........................................70
Section 13.4      Transfer and Maintenance of Register.......................70

ARTICLE XIV. INDEMNIFICATION.................................................71

Section 14.1      General Indemnity of Borrower..............................71
Section 14.2      Indemnity of Servicer......................................71

ARTICLE XV. MISCELLANEOUS....................................................71

Section 15.1      No Waiver; Remedies........................................71
Section 15.2      Amendments, Etc............................................72
Section 15.3      Notices, Etc...............................................72
Section 15.4      Costs, Expenses and Taxes..................................72
Section 15.5      Binding Effect; Survival...................................73
Section 15.6      Captions and Cross References..............................73
Section 15.7      Severability...............................................73
Section 15.8      Governing Law..............................................73
Section 15.9      Counterparts...............................................74
Section 15.10     Submission to Jurisdiction; Waiver of Trial by Jury........74
Section 15.11     No Recourse Against Conduit Lenders........................74
Section 15.12     No Proceedings.............................................74
Section 15.13     Confidentiality............................................75

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Section 15.14     Entire Agreement...........................................75

                                      vii
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                             EXHIBITS AND SCHEDULES

EXHIBIT A              Form of Borrowing Request
EXHIBIT B              Form of Lender Note
EXHIBIT C              Form of Monthly Report
EXHIBIT D              Form of Borrowing Base Certificate
EXHIBIT E              Form of Performance Undertaking
EXHIBIT F              Form of Letter of Credit Request Transmittal Letter

SCHEDULE 8.12          LockBoxes and LockBox Accounts
SCHEDULE 9.1.5         Procedures Review Requirements
SCHEDULE 15.3          Notice Addresses



                                      viii
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                       AMENDED AND RESTATED LOAN AGREEMENT

     THIS  AMENDED AND  RESTATED  LOAN  AGREEMENT is made and entered into as of
December 1, 2005, among:

     (a) BOWATER FUNDING INC., a Delaware corporation ("Borrower"),

     (b)  BOWATER  INCORPORATED,  a  Delaware  corporation  (together  with  its
successors,  "Bowater"),  in its  capacity  as the  initial  servicer  (in  such
capacity,  together with its successors and permitted  assigns in such capacity,
the "Servicer"),

     (c) THREE  PILLARS  FUNDING LLC (F/K/A THREE PILLARS  FUNDING  CORPORATION)
("Three  Pillars") and VARIABLE FUNDING CAPITAL COMPANY LLC ("VFCC" and together
with Three Pillars, the "Conduit Lenders"),

     (d)  SUNTRUST  BANK  ("STB")  and  WACHOVIA  BANK,   NATIONAL   ASSOCIATION
("Wachovia" and, together with STB, the "Committed Lenders"),

     (e) STB and WACHOVIA in their  capacities as issuers of certain  letters of
credit  (each,  in such  capacity,  an "LC Issuer"  and,  collectively,  the "LC
Issuers"),

     (f) SUNTRUST CAPITAL MARKETS, INC. ("STCM"), as agent and administrator for
Three Pillars,  STB and their  respective  successors and permitted  assigns (in
such capacity,  together with its  successors and assigns in such capacity,  the
"Three Pillars Agent"),  and WACHOVIA BANK, NATIONAL  ASSOCIATION,  as agent and
administrator for VFCC,  Wachovia and their respective  successors and permitted
assigns (in such  capacity,  together  with its  successors  and assigns in such
capacity,  the "VFCC Agent" and,  together  with the Three  Pillars  Agent,  the
"Co-Agents"), and

     (g) SUNTRUST CAPITAL MARKETS, INC., as administrative agent for the Conduit
Lenders,  the Committed  Lenders and the Co-Agents (in such  capacity,  together
with its successors and assigns in such capacity, the "Administrative Agent"),

and amends and restates in its entirety that certain Loan Agreement dated as of
December 19, 2002 among the parties hereto other than the LC Issuers (the
"Existing Agreement").

                                   BACKGROUND

          1.  Borrower  desires that the Lenders  (hereinafter  defined)  extend
     financing to Borrower. In addition,  Borrower may from time to time request
     one of the LC  Issuers  to issue a Letters of Credit  upon  application  of
     Borrower.

          2. Each of the Lenders is willing to extend such  financing,  and each
     of the LC Issuers is willing to issue such Letters of Credit,  on the terms
     and subject to the conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as follows:

                                       1
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                                   ARTICLE I.
                                   DEFINITIONS

     Section 1.1 Defined Terms. As used in this Agreement, (a) capitalized terms
used and not  otherwise  defined  herein are used with the  meanings  attributed
thereto in the Receivables  Sale Agreement  (hereinafter  defined),  and (b) the
following terms have the following meanings:

     "Accounts  Receivable  Turnover Ratio" means, on any date of determination,
the ratio computed as of the last day of the most recent  Calculation  Period by
dividing (a) the  aggregate  amount of Credit  Sales  entered into during the 12
months  ending on with such  Calculation  Period  by (b) the  average  month-end
amount of the  aggregate  Unpaid  Balance  of  Receivables  during the 12 months
ending with such Calculation Period.

     "Administrative  Agent" has the meaning  set forth in the  preamble to this
Agreement.

     "Administrative  Agent's Fee Letter" means that certain fee letter dated as
of December 19, 2002 by and among Bowater, Borrower and STCM, as the same may be
amended, restated and/or otherwise modified from time to time.

     "Advance" means the Loans made on any given date.

     "Advance Rate" means the percentage equal to (a) 100% minus (b) the Reserve
Percentage.

     "Adverse  Claim"  has  the  meaning   specified  in  the  Receivables  Sale
Agreement.

     "Affected Party" means each of the Agents, the Lenders, the LC Issuers, the
Support Providers, any permitted assignee of any of the foregoing, any holder of
a participation  interest in the rights and obligations of any of the foregoing,
and any holding company of any Committed Lender or LC Issuer.

     "Affiliate"  of any Person  means any other  Person  that (a)  directly  or
indirectly  controls,  is  controlled  by or is under  common  control with such
Person or (b) is an officer or director of such Person. A Person shall be deemed
to be "controlled by" another Person if such other Person possesses, directly or
indirectly,  power (i) to vote 5% or more of the  securities (on a fully diluted
basis)  having  ordinary  voting power for the election of directors or managing
partners of such other  Person,  or (ii) to direct or cause the direction of the
management  and policies of such other Person  whether by contract or otherwise.
The word "Affiliated" has a correlative meaning.

     "Agents" means, collectively, the Administrative Agent and the
Co-Agents.

     "Aggregate   Excess   Concentration   Amount"   means,   on  any   date  of
determination,  the  aggregate  of all  Excess  Concentration  Amounts,  without
double-counting any Receivable that would be excluded by virtue of more than one
clause in the definition of "Concentration Limit."

                                       2
<PAGE>

                  "Aggregate Face Amount Outstanding" means, on any date of
determination, the aggregate undrawn amount of Letters of Credit then
outstanding.

     "Aggregate  Unpaid  Balance"  means,  on any  date  of  determination,  the
aggregate Unpaid Balance of all Eligible Receivables at such time.

     "Agreement" means this Loan Agreement, as it may be amended,  supplemented,
restated or otherwise  modified from time to time in  accordance  with the terms
hereof.

     "Alternative Rate" means:

          (a) for any Interest  Period while the LIBOR Rate is  unavailable,  an
     interest  rate per annum  equal to the sum of (i) the Base Rate,  plus (ii)
     the Applicable Margin,

          (b) for any Interest  Period until the applicable  Lender has received
     not less than three (3) Business Days' prior notice that Borrower wishes to
     select a LIBOR Rate, an interest rate per annum equal to the sum of (i) the
     Base Rate, plus (ii) the Applicable Margin, and

          (c) at all other times, an interest rate per annum equal to the sum of
     (i) the LIBOR Rate applicable to such Interest Period,  plus (ii) the LIBOR
     Margin.

     "Alternative  Rate Loan" means any Loan that is not funded with  Commercial
Paper Notes, including, without limitation, any Loan from and after the time, if
any,  when the  applicable  Conduit  Lender  transfers  such Loan, or borrows to
finance such Loan, under its Liquidity Agreement.

     "Amortization Event" means any of the events described in Section 10.2.

     "Applicable Margin" has the meaning specified in the Co-Agents' Fee Letter.

     "Approved Foreign Country" means each country (other than the United States
of America)  that has  sovereign  debt rated at least "AA-" or better by S&P and
"Aa3" or better by Moody's; provided,  however, that either of the Co-Agents may
revoke the  "approved"  status of any such  country  (other  than Canada and the
United Kingdom) upon 5 Business Days' notice to the Borrower.

     "BAI" has the meaning set forth in the Receivables Sale Agreement.

     "Bankruptcy  Code" means the United States  Bankruptcy  Code, 11 U.S.C. ss.
101 et seq., as amended.

     "Base Rate" means,  on any date of  determination,  a  fluctuating  rate of
interest per annum equal to the higher of (a) the Prime Rate, or (b) the Federal
Funds Rate most recently  determined by the  applicable  Co-Agent plus 0.50% per
annum.

     "Borrower" has the meaning set forth in the preamble to this Agreement.

                                       3
<PAGE>

     "Borrower's  Account" means account no. 9102524478 at JP Morgan Chase Bank,
N.A. in New York, New York.

     "Borrowing  Base" means, on any date, an amount equal to (a) the product of
(i)  the  Advance  Rate,  calculated  as of the  last  day of  the  most  recent
Calculation  Period,  times  (ii) the  excess,  if any,  as of the  most  recent
Calculation Date for which a Borrowing Base Certificate has been (or is required
to have been) delivered of (A) the Aggregate  Unpaid Balance,  minus (B) the sum
of (i) the accrued  reserve for contractual  discounts and allowances,  and (ii)
the aggregate Excess Concentration Amount minus (b) the Foreign Currency Reserve
as of the Calculation Date referred to in "(a)(ii)" above.

     "Borrowing Base Certificate" means a certificate, substantially in the form
of  Exhibit D  hereto,  duly  executed  by an  authorized  Senior  Executive  of
Servicer.

     "Borrowing  Base Deficit" means,  on any date of  determination,  an amount
equal to the excess,  if any, of (a) the aggregate  Credit Exposure at such time
over (b) the Borrowing Base.

     "Borrowing  Request"  means a  notice  in the  form of  Exhibit  A (or,  if
acceptable to the Co-Agents,  the information  required  therein may be given by
telephone and promptly  confirmed via fax) specifying the date and amount of the
requested  Advance,  each  Group's  Funding  Amount  and,  in the  case of Three
Pillars, the duration of the requested CP Tranche Period.

     "Bowater" has the meaning set forth in the preamble to this Agreement.

     "Bowater  Downgrade"  has the  meaning  set forth in the  Receivables  Sale
Agreement.

     "Broken Funding Costs" means:

          (a) for  any CP  Loan  (i) of VFCC  which  has its  principal  reduced
     without compliance by Borrower with the notice requirements hereunder, (ii)
     of Three Pillars which has its principal reduced on any date other than the
     last day of the applicable CP Tranche Period and (iii) which is assigned by
     the applicable  Conduit  Lender to its Liquidity  Banks under its Liquidity
     Agreement or any other applicable Support Agreement, an amount equal to the
     excess,  if any, of (A) the amount of interest  that would have  accrued at
     the Commercial  Paper Rate during the remainder of the applicable  Interest
     Periods or CP Tranche Periods for the Related  Commercial  Paper subsequent
     to the date of such  reduction or  assignment of the principal of such Loan
     if such reduction or assignment  had not occurred,  over (B) the sum of (1)
     to the extent all or a portion of such  principal  is  allocated to another
     Loan, the amount of interest  actually accrued during the remainder of such
     period on such  principal  for the new  Loan,  and (2) to the  extent  such
     principal is not allocated to another Loan,  the income,  if any,  actually
     received  during the  remainder  of such  period by the holder of such Loan
     from investing the portion of such principal not so allocated,


                                       4
<PAGE>

          (b) for any CP Loan or LIBOR Loan not  prepaid  following  delivery of
     any prepayment notice, the reasonable  expenses,  if any, actually incurred
     by the applicable  Lenders  following receipt of such prepayment notice and
     in connection therewith, and

          (c) for any LIBOR  Loan that is  prepaid on a date other than the last
     day of its  Interest  Period,  the  excess,  if any,  of (A) the  amount of
     interest  that would have accrued at the LIBOR Rate during the remainder of
     the applicable  Interest Periods  subsequent to the date of such prepayment
     if such prepayment had not occurred,  over (B) the sum of (1) to the extent
     all or a portion of such principal is allocated to another Loan, the amount
     of interest  actually  accrued  during the remainder of such period on such
     principal  for the new Loan,  and (2) to the extent such  principal  is not
     allocated to another Loan, the income, if any, actually received during the
     remainder  of such  period by the  holder of such Loan from  investing  the
     portion of such principal not so allocated

All Broken Funding Costs shall be due and payable hereunder upon demand.

     "Business Day" means any day on which (a) commercial banks in New York, New
York, and Atlanta,  Georgia, are not authorized or required to be closed and The
Depository  Trust Company of New York is open for business,  and (b) in the case
of a Rate  Setting  Date for Loans  bearing  interest by  reference to the LIBOR
Rate, banks are open for business in London, England.

     "Calculation Date" means:

          (a) at any time  while  Bowater's  unsecured  senior  debt is rated at
     least  BBB- by S&P and  Baa3 by  Moody's,  the  last  Business  Day of each
     Calculation  Period unless the Borrower  elects to report weekly,  in which
     case clause (c) shall govern;

          (b) at any time while Bowater's unsecured senior debt is rated BB+, BB
     or BB- by S&P and/or Ba1, Ba2 or Ba3 by Moody's,  the fifteenth  (15th) day
     of a calendar month and last Business Day of each Calculation Period unless
     the  Borrower  elects to report  weekly,  in which  case  clause  (c) shall
     govern; and

          (c) at any time while Bowater's  unsecured  senior debt is rated B+ or
     lower by S&P or B1 or lower by Moody's, the last Business Day of each week.

Nothing herein shall be deemed to preclude the provision of a Borrowing Base
Certificate on a more frequent basis than would otherwise be required by the
terms of this definition.

     "Calculation Period" means a calendar month.

     "Cash-Collateralize"  means to pledge  and  deposit  immediately  available
funds into the Letter of Credit Collateral  Account at the applicable LC Issuer,
as  collateral  for the LC  Obligations  owing to that LC  Issuer,  pursuant  to
documentation in form and substance satisfactory to the Administrative Agent and
that LC Issuer.

                                       5

     "Charge-Off"   means  a  Receivable  not  previously   deemed  a  Defaulted
Receivable that is written-off by the Servicer or should, in accordance with the
Credit and Collection Policy, be written-off.

     "Closing Date" means December 1, 2005.

     "Co-Agents" has the meaning set forth in the preamble to this Agreement.

     "Co-Agents' Fee Letter" means that certain amended and restated  Co-Agents'
fee letter dated as of December 1, 2005 by and among Bowater,  Borrower,  the LC
Issuers and the Co-Agents, as the same may be amended, restated and/or otherwise
modified from time to time.

     "Collateral" has the meaning set forth in Section 5.1(a).

     "Collections" has the meaning set forth in the Receivables Sale Agreement.

     "Commercial Paper Notes" means short-term promissory notes issued by any of
the Conduit  Lenders to fund its Loans or  investments  in  receivables or other
financial assets.

     "Commercial Paper Rate" means:

     (a) For any CP Tranche Period of Three  Pillars,  a rate per annum equal to
the sum of (i) the rate or, if more than one rate,  the weighted  average of the
rates, determined by converting to an interest-bearing equivalent rate per annum
the discount rate (or rates) at which Three Pillars'  Related  Commercial  Paper
outstanding  during  such  CP  Tranche  Period  has  been  or may be sold by any
placement agent or commercial  paper dealer selected by the Three Pillars Agent,
plus  (ii) the  commissions  and  charges  charged  by such  placement  agent or
commercial paper dealer with respect to such Related Commercial Paper, expressed
as a percentage of the face amount thereof and converted to an  interest-bearing
equivalent rate per annum;

     (b) For any CP  Tranche  Period  of VFCC,  the rate per  annum  that,  when
applied to the  outstanding  principal  balance of VFCC's  Loans  during such CP
Tranche  Period for the actual  number of days  elapsed on a 360-day  year basis
would equate to VFCC's CP Costs for such CP Tranche Period; and

     "Commitment"  means,  as to each Committed  Lender,  its commitment to make
Loans to Borrower in an aggregate  principal  amount at any one time outstanding
not exceeding the amount set forth below its signature to this Agreement.

     "Commitment Termination Date" means, with respect to the Committed Lenders,
the earliest to occur of (i) the Scheduled Commitment
Termination Date, (ii) the date of any termination of the Committed Lenders'
Commitments pursuant to Section 2.6, (iii) the effective date on which the
Committed Lenders' Commitments are terminated pursuant to Section 10.3, and (iv)
the Liquidity Termination Date of any Conduit Lender.

     "Committed  Lenders"  has the  meaning  set forth in the  preamble  to this
Agreement.

                                        6

     "Concentration  Limit"  means,  as to  the  applicable  group  of  Eligible
Receivables:

          (a) for each Obligor whose short term  unsecured  debt ratings are (i)
     equal  to  A-1+  by S&P and P-1 by  Moody's,  12% of the  Aggregate  Unpaid
     Balance;  (ii) greater than or equal to A-1 by S&P and P-1 by Moody's,  10%
     of the Aggregate Unpaid Balance;  (iii) greater than or equal to A-2 by S&P
     and P-2 by  Moody's  but less than the  ratings  in  clause  (ii) 6% of the
     Aggregate  Unpaid Balance;  or (iv) less than A-2 by S&P or P-2 by Moody's,
     3% of the Aggregate Unpaid Balance; or

          (b) for each  Obligor  who does not have  short  term  unsecured  debt
     ratings  from  both S&P and  Moody's  of at least the  levels  set forth in
     clause  (a)(i),  (ii) or (iii) above but who has long term  unsecured  debt
     ratings  from both S&P and Moody's  which are (i) greater  than or equal to
     both AA by S&P and Aa2 by Moody's,  12% of the  Aggregate  Unpaid  Balance;
     (ii)  greater  than or equal to both A- by S&P and A3 by  Moody's  but less
     than the ratings in clause (i), 10% of the  Aggregate  Unpaid  Balance;  or
     (iii)  greater  than or equal to BBB- by S&P and Baa3 by  Moody's  but less
     than the ratings in clause (ii), 6% of the Aggregate Unpaid Balance;

          (c) for each  Obligor  who does not have  short  term  unsecured  debt
     ratings or long term  unsecured  debt ratings from both S&P and Moody's and
     is not a Special Obligor, 3% of the Aggregate Unpaid Balance;

          (d) for each Special Obligor, 6% of the Aggregate Unpaid Balance;

          (e) for all Obligors  domiciled in Italy  considered in the aggregate,
     4.0% of the Aggregate Unpaid Balance;

          (f)  for  all  Obligors   domiciled  in  Approved  Foreign   Countries
     (including Italy) considered in the aggregate,  15% of the Aggregate Unpaid
     Balance of which 15% up to two-thirds  (2/3) may be denominated in Canadian
     dollars or Pounds Sterling;

          (g) for all Eligible Receivables with payment terms of 31-45 days, 40%
     of the Aggregate Unpaid Balance; and

          (h) for all Eligible Receivables with payment terms of 46-90 days, 20%
     of the Aggregate Unpaid Balance,

     provided  that  (1) the  limitations  set  forth in the  foregoing  clauses
     (a)-(d)  above shall apply to each  specified  Obligor and its  Affiliates,
     considered  as if they were one and the same Person,  (2) in the event that
     any Obligor has both long-term and  short-term  unsecured debt ratings from
     both S&P and Moody's that are covered under the  foregoing  clauses (a) and
     (b), the short-term debt ratings under clause (a) above shall control,  and
     (3) for purposes of determining  compliance with clauses (g) and (h) above,
     "payment terms" shall be computed in accordance with the Prox Rules.

                                       7

     "Conduit  Lenders"  has the  meaning  set  forth  in the  preamble  to this
Agreement.

     "Contract" has the meaning set forth in the Receivables Sale Agreement.

     "Covered Taxes" means Taxes other than Excluded Taxes.

     "CP  Costs"  means,  for VFCC  for each  day,  the sum of (i)  discount  or
interest  accrued on its Pooled  Commercial Paper on such day, plus (ii) any and
all accrued  commissions in respect of its placement agents and Commercial Paper
Note  dealers,  and issuing and paying agent fees  incurred,  in respect of such
Pooled  Commercial  Paper for such day, plus (iii) other costs  associated  with
funding  small or odd-lot  amounts  with respect to all  receivable  purchase or
financing  facilities  which are funded by its Pooled  Commercial Paper for such
day, minus (iv) any accrual of income net of expenses  received on such day from
investment of collections  received  under all receivable  purchase or financing
facilities funded  substantially with its Pooled Commercial Paper, minus (v) any
payment  received on such day net of expenses in respect of Broken Funding Costs
related to the prepayment of any investment of VFCC pursuant to the terms of any
receivable  purchase or financing  facilities funded  substantially  with Pooled
Commercial  Paper.  In addition to the  foregoing net costs,  if Borrower  shall
request any Loan during any period of time  determined  by the VFCC Agent in its
sole discretion to result in  incrementally  higher CP Costs  applicable to such
Loan, the principal  associated with any such Loan shall, during such period, be
deemed to be  funded  by VFCC in a  special  pool  (which  may  include  capital
associated with other receivable purchase or financing  facilities) for purposes
of determining CP Costs applicable to such Loan.

     "CP Loan" means a Loan made by a Conduit Lender at any time it is funded or
maintained with the proceeds of Commercial Paper Notes.

     "CP Tranche Period" means:

          (a) with respect to Three  Pillars' CP Loans,  a period of days from 1
     Business  Day up to the number of days  necessary  to extend such period to
     include the next  Distribution  Date,  commencing  on a Business  Day which
     period is either (i)  requested  by Borrower  and agreed to by such Conduit
     Lender  or its  Co-Agent  or  (ii)  in the  absence  of  such  request  and
     agreement,  selected  by such  Conduit  Lender  or its  Co-Agent  (it being
     understood  that the goal  shall be to select a period  which ends on or as
     close to the next Distribution Date as possible), and

          (b) with respect to VFCC, each month (or portion  thereof) ending on a
     Distribution Date, during which VFCC has any outstanding CP Loan hereunder.

     "Credit and Collection Policy" has the meaning set forth in the Receivables
Sale Agreement.

     "Credit Event" means the issuance of Letter of Credit or the
making of an Advance under this Agreement.

     "Credit  Exposure" means, at any time as to any Purchaser or Group, the sum
of its outstanding  Capital plus the principal  amount of its interest in the LC
Obligations.  In


                                       8

<PAGE>

computing  the amount of Credit  Exposure,  (i) Borrower  shall
exclude the amount of any LC Obligations that are fully Cash-Collateralized, and
(ii) in  connection  with an  Advance,  the  proceeds  of which  will be used to
refinance  a draw  under a Letter of  Credit,  Borrower  need not count both the
Reimbursement Obligation and the amount that the Lenders will pay to Borrower on
account of such Advance.

     "Credit Sales" means, for any period of determination, the aggregate amount
of all Receivables originated by any Seller during such period.

     "Days Sales  Outstanding  Ratio" means, on any date of  determination,  the
ratio  computed  as of the last day of the most  recent  Calculation  Period  by
dividing  (a) 360 by (b) the  Accounts  Receivable  Turnover  Ratio for the most
recent Calculation Period.

     "Debt" of any Person means,  without  duplication,  (i) all indebtedness of
such Person for borrowed  money,  (ii) all  indebtedness  of such Person for the
deferred  purchase  price of  property  or services  (other  than  property  and
services  purchased,  and  expense  accruals  and  deferred  compensation  items
arising,  in the ordinary  course of business),  (iii) all  obligations  of such
Person evidenced by notes, bonds, debentures or other similar instruments (other
than  performance,  surety and appeal bonds  arising in the  ordinary  course of
business),  (iv) all  indebtedness  of such Person  created or arising under any
conditional  sale or other title  retention  agreement  with respect to property
acquired by such Person  (even  though the rights and  remedies of the seller or
lender under such agreement in the event of default are limited to  repossession
or sale of such property), (v) all obligations of such Person under leases which
have been or should be, in accordance with GAAP,  recorded as capital leases, to
the  extent  required  to be so  recorded,  (vi) all  reimbursement,  payment or
similar obligations of such Person,  contingent or otherwise,  under acceptance,
letter of credit or similar  facilities (other than letters of credit in support
of trade obligations or in connection with workers'  compensation,  unemployment
insurance,  old-age pensions and other social security  benefits in the ordinary
course of  business),  (vii) all net  obligations  of such  Person in respect of
interest rate swap, cap, collar, swaption, option or similar agreements,  (viii)
all  obligations  arising in connection  with a sale or other transfer of any of
such Person's  financial assets which are, or are intended to be,  classified as
loans for federal tax purposes, (ix) all Debt referred to in clauses (i) through
(viii) above  guaranteed  directly or  indirectly  by such Person,  or in effect
guaranteed directly or indirectly by such Person through an agreement (A) to pay
or purchase  such Debt or to advance or supply funds for the payment or purchase
of such Debt, (B) to purchase,  sell or lease (as lessee or lessor) property, or
to purchase or sell  services,  primarily for the purpose of enabling the debtor
to make  payment of such Debt or to assure the holder of such Debt  against loss
in respect of such Debt, (C) to supply funds to or in any other manner invest in
the debtor (including any agreement to pay for property or services irrespective
of whether  such  property is received or such  services  are  rendered)  or (D)
otherwise to assure a creditor against loss in respect of such Debt, and (x) all
Debt  referred to in clauses (i) through  (viii) above  secured by (or for which
the holder of such Debt has an existing  right,  contingent or otherwise,  to be
secured by) any lien,  security  interest or other charge or encumbrance upon or
in property (including, without limitation,  accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such Debt.

                                       9

     "Default Rate" means the sum of (i) the Base Rate  applicable  from time to
time (but not less than the interest rate in effect for such Loan as at the date
of the Significant Event giving rise thereto), plus (ii) 2.00% per annum.

     "Default Ratio" means, on any date of  determination,  the ratio (expressed
as a percentage)  computed as of the last day of most recent  Calculation Period
by dividing (a) the sum (without  double  counting) of (i) the Unpaid Balance of
Receivables that became Defaulted  Receivables  during such Calculation  Period,
plus (ii) the Unpaid Balance of Receivables that became  Charge-Offs during such
Calculation  Period by (b)  Credit  Sales for the  Calculation  Period  ending 4
months prior to beginning of such Calculation Period.

     "Defaulted  Receivable"  means,  as  of  any  date  of  determination,  any
Receivable  (i) which the  Servicer  has or should  have  charged-off  or deemed
uncollectible in accordance with the Credit and Collection Policy after taking a
reasonable  time to  apply  Collections  received  to  applicable  invoices  and
reconcile the amount of such  Receivable,  (ii) as to which,  as of such date of
determination,  any payment, or part thereof, remains unpaid for 91 days or more
past the due date for such  payment,  determined  by  reference  to the original
contractual  payment terms of such Receivable or (iii) unless each of the Agents
in its sole discretion has otherwise agreed, as to which the Obligor thereon has
suffered an Event of Bankruptcy.

     "Delinquency Ratio" means, as of any date of determination,
the ratio (expressed as a percentage) computed as of the last day of the most
recent Calculation Period, by dividing (a) the Unpaid Balance of Receivables
that are Delinquent Receivables as of such date by (b) an amount equal to the
Aggregate Unpaid Balance as of such date minus the Aggregate Excess
Concentration Amounts as of such date.

     "Delinquent  Receivable"  means,  as of  any  date  of  determination,  any
Receivable as to which, as of such date of determination,  any payment,  or part
thereof,  remains  unpaid  for 61-90  days  past the due date for such  payment,
determined  by  reference  to the  original  contractual  payment  terms of such
Receivable.

     "Demand  Loan"  means a loan made by Borrower to BAI or Bowater at a market
rate of interest  that is payable on demand and is not evidenced by a promissory
note or other instrument.

     "Dilution  Horizon Ratio" means,  on any date of  determination,  the ratio
(expressed  as a  percentage)  computed  as of the last  day of the most  recent
Calculation  Period by  dividing  (a) an amount  equal to the sum of (i)  Credit
Sales for such  Calculation  Period  plus (ii) 50% of the  Credit  Sales for the
Calculation  Period  immediately  preceding the Calculation  Period described in
clause (i) by (b) an amount equal to (i) the Aggregate Unpaid Balance as of such
last day minus (ii) the Aggregate  Excess  Concentration  Amount as of such last
day.

     "Dilution Ratio" means, on any date of determination,  the ratio (expressed
as a  percentage)  computed  as of the last day of the most  recent  Calculation
Period by dividing (a) Dilutions for such Calculation Period by (b) Credit Sales
for  the  Calculation  Period  immediately   preceding  the  Calculation  Period
described in clause (a).


                                    10<PAGE>

     "Dilution  Reserve"  means,  on any  date  of  determination,  the  product
computed as of the last day of the most recent  Calculation  Period,  of (a) the
sum of (i) the product of (x) the Stress Factor times (y) the Expected  Dilution
Ratio plus (ii) the product of (x) the positive difference,  if any, between (1)
the Dilution  Spike Rate less (2) the Expected  Dilution Ratio times (y) a ratio
computed by dividing  (1) the Dilution  Spike Rate by (2) the Expected  Dilution
Ratio times (b) the Dilution Horizon Ratio.

     "Dilution  Spike Rate"  means,  on any date of  determination,  the highest
Dilution  Ratio  over the  12-month  period  ending  on the last day of the most
recent Calculation Period.

     "Dilutions" means, for any period of determination, the aggregate amount of
returns, allowances, net credits and any other non-cash reductions to the Credit
Sales  during such  period;  provided,  that  "Dilutions"  shall not include any
write-down, reserve or other reduction due to a Receivable subsequently becoming
a Defaulted  Receivable  or otherwise  bearing on the  uncollectability  of such
Receivable on account of the insolvency,  bankruptcy,  lack of credit worthiness
or financial inability to pay of the applicable Obligor.

     "Distribution  Date"  means the 14th day of each  calendar  month after the
Closing  Date (or if any such day is not a  Business  Day,  the next  succeeding
Business Day).

     "Documents" means all documentation  relating to the Receivables including,
without limitation,  the Contracts,  billing statements and computer records and
programs.

     "Dollar(s)"  and the sign "$" shall mean lawful money of the United  States
of America.

     "Eligible  Receivable"  means  each  Receivable  that  meets the  following
criteria:

          (a) that was  created  by  Bowater  or BAI (i) in  compliance,  in all
     material  respects,  with its Credit and Collection  Policy and (ii) in the
     ordinary course of its business;

          (b) that was  documented in all material  respects in compliance  with
     the applicable Seller's standard  administration and documentation policies
     and procedures;

          (c) that is not a Delinquent Receivable or a Defaulted Receivable;

          (d) as to  which,  at the  time of the  sale or  contribution  of such
     Receivable  to  Borrower,  BAI was the sole owner  thereof and had good and
     marketable title thereto,  free and clear of all Adverse Claims,  and which
     was sold or  contributed  to  Borrower  pursuant  to the  Receivables  Sale
     Agreement  free and clear of all Adverse  Claims other than in favor of the
     Administrative Agent for the benefit of the Secured Parties;

          (e)  the  assignment  of  which  by  each  applicable  Seller  to each
     applicable  Transferee  pursuant to the Receivables Sale Agreement does not
     contravene  or conflict in any material  respect with any  applicable  law,
     rule or

                                       11
<PAGE>

     regulation  or  any  contractual  or  other   restriction,   limitation  or
     encumbrance,  and the sale or  assignment  of which  does not  require  the
     consent of the Obligor thereof;

          (f) (i) which is denominated and payable in Dollars,  or (ii) which is
     denominated and payable in Canadian  dollars or Pounds Sterling and, in any
     event, is only payable in the United States of America or to the LockBox at
     Wachovia  Bank,  National  Association,  in London,  England  identified on
     Schedule  8.12 once the related  LockBox  Account is subject to a perfected
     assignment for collateral purposes;

          (g) the Obligor of which is a resident or organized  under the laws of
     the United States or an Approved Foreign Country;

          (h) the Obligor of which is not an officer,  director or  Affiliate of
     any Seller or Borrower;

          (i) the Obligor of which is not a Governmental Authority;

          (j) that is in full force and effect and constitutes the legally valid
     and  binding  payment  obligation  of the  Obligor  with  respect  thereto,
     enforceable  against such Obligor in  accordance  with its terms and is not
     subject to any dispute, right of rescission,  set-off,  counterclaim or any
     other defense (including  defenses arising out of violations of usury laws)
     of the  applicable  Obligor  against  the  applicable  Seller  or any other
     Adverse  Claim,  and the  Obligor  thereon  holds no right as against  such
     Seller to cause such Seller to repurchase the goods the sale of which shall
     have given rise to such  Receivable  (except with respect to sale discounts
     effected pursuant to the Contract, or goods returned in accordance with the
     terms of the Contract);

          (k) that does not  contravene in any material  respect any  applicable
     requirements  of law  (including  without  limitation  all laws,  rules and
     regulations relating to truth in lending,  fair credit billing, fair credit
     reporting,  fair debt collection  practices and privacy) and which complies
     in all material  respects with all applicable  requirements of law and with
     respect to which all consents, licenses, approvals or authorizations of, or
     registrations or declarations with, any governmental  authority required to
     be obtained, effected or given by the related Seller in connection with the
     creation or the execution,  delivery and  performance  of such  Receivable,
     have  been  duly  obtained,  effected  or given  and are in full  force and
     effect;

          (l) that complies with all applicable  requirements  of the Credit and
     Collection Policy;

          (m)  as to  which  each  of  Borrower's  ownership  interest  and  the
     Administrative  Agent's  (for the  benefit of the  Secured  Parties)  first
     priority  security interest in such Receivable has been perfected under the
     applicable Uniform Commercial Code and other applicable laws;

                                       12
<PAGE>


          (n)  as  to  which  the  Servicer  is in  possession  of  the  related
     Receivable File;

          (o) which provides for repayment in full of the Unpaid Balance thereof
     within 90 days of the date of the creation thereof;

          (p) the terms of which  have not been  modified  or  waived  except as
     permitted under the Credit and Collection Policy and this Agreement;

          (q) which constitutes an "account" or a "payment intangible" under and
     as defined in Article 9 of the Uniform  Commercial  Code of all  applicable
     jurisdictions; and

          (r)  as to  which  the  applicable  Seller  has  satisfied  and  fully
     performed  all  obligations  on its part with  respect  to such  Receivable
     required  to be  fulfilled  by it, and no further  action is required to be
     performed by any Person with respect  thereto other than payment thereon by
     the applicable Obligor.

     "Event of  Bankruptcy"  shall be deemed to have  occurred with respect to a
Person if either:

          (a) a case  or  other  proceeding  shall  be  commenced,  without  the
     application  or  consent  of  such  Person,  in  any  court,   seeking  the
     liquidation,  reorganization, debt arrangement, dissolution, winding up, or
     composition or readjustment  of debts of such Person,  the appointment of a
     trustee, receiver,  custodian,  liquidator,  assignee,  sequestrator or the
     like for such  Person or all or  substantially  all of its  assets,  or any
     similar  action  with  respect to such  Person  under any law  relating  to
     bankruptcy,  insolvency,  reorganization,  winding  up  or  composition  or
     adjustment  of debts  and,  solely  in the case of  Borrower,  such case or
     proceeding  shall continue  undismissed,  or unstayed and in effect,  for a
     period of 60  consecutive  days;  or an order for relief in respect of such
     Person shall be entered in an involuntary case under the federal bankruptcy
     laws or other similar laws now or hereafter in effect; or

          (b) such Person shall  commence a voluntary  case or other  proceeding
     under  any  applicable   bankruptcy,   insolvency,   reorganization,   debt
     arrangement,  dissolution  or other similar law now or hereafter in effect,
     or shall consent to the appointment of or taking  possession by a receiver,
     liquidator,  assignee, trustee,  custodian,  sequestrator (or other similar
     official) for such Person or for any substantial  part of its property,  or
     shall make any general  assignment  for the benefit of creditors,  or shall
     fail to, or admit in writing its inability  to, pay its debts  generally as
     they become  due,  or, if a  corporation  or similar  entity,  its board of
     directors shall vote to authorize any of the foregoing.

     "Event of Default" means any of the events described in Section 10.1.

     "Excess  Concentration  Amount" means, on any date of  determination,  with
respect to each Concentration  Limit, the amount, if any, by which the aggregate
Unpaid  Balance


                                       13
<PAGE>

of Eligible Receivables for the applicable group of Eligible Receivables covered
by such  Concentration  Limit  exceeds  the  limit  therefore  set  forth in the
definition of "Concentration Limit".

     "Excluded Taxes" means, in the case of any Indemnified Party, taxes imposed
on its overall net income,  and franchise taxes and branch profit taxes based on
net income, imposed on it by any jurisdiction.

     "Existing  Agreement"  has the  meaning  set forth in the  preamble to this
Agreement.

     "Expected Dilution Ratio" means, on any date of determination,  the rolling
twelve-month  average  Dilution Ratio for the 12-month period ending on the last
day of the most recent Calculation Period.

     "Facility Limit" means $200,000,000.

     "Federal Funds Rate" means, for any period, the per annum rate set forth in
the  weekly  statistical  release  designated  as  H.15(519),  or any  successor
publication,  published  by  the  Federal  Reserve  Board  (including  any  such
successor,  "H.15(519)")  for such  day  opposite  the  caption  "Federal  Funds
(Effective)." If, at the time of calculation, such rate for any relevant day, is
not yet published in H.15(519), the rate for such day will be the rate set forth
in  the  daily  statistical  release  designated  as  the  Composite  3:30  p.m.
Quotations  for  U.S.  Government  Securities,  or any  successor  publications,
published by the Federal Reserve Bank of Atlanta  (including any such successor,
the "Composite 3:30 p.m.  Quotations")  for such day under the caption  "Federal
Funds Effective Rate." If, at the time of calculation,  the appropriate rate for
any relevant day is not yet published in either  H.15(519) or the Composite 3:30
p.m. Quotations, the rate for such day will be the arithmetic mean as determined
by Bank of the  rates  for the  last  transaction  in  overnight  Federal  funds
arranged prior to 9:00 a.m. (New York time) on that day by each of three leading
brokers  of  Federal  funds  transactions  in  New  York  City  selected  by the
applicable Co-Agent.

     "Fee  Letters"  means  (a)  the   Co-Agents'   Fee  Letter,   and  (b)  the
Administrative Agent's Fee Letter.

     "Fees" means all LC Fees,  other fees and other amounts payable by Borrower
to any of the Agents, LC Issuers or Lenders pursuant to a Fee Letter.

     "Fitch" means Fitch, Inc., and any successor thereto.

     "Foreign Currency  Reserve" means, on any date of determination,  an amount
equal to 7.5% of the spot market  Dollar-equivalent  of all Eligible Receivables
otherwise  included  in the  Borrowing  Base which are  denominated  in Canadian
dollars  plus  25%  of  the  spot  market   Dollar-equivalent  of  all  Eligible
Receivables  otherwise  included in the Borrowing Base which are  denominated in
Pounds Sterling.

     "Funding Amount" has the meaning set forth in Section 2.1(a).

                                       14
<PAGE>

     "GAAP" has the meaning set forth in the Receivables Sale Agreement.

     "Governmental  Authority" has the meaning set forth in the Receivables Sale
Agreement.

     "Group" means any of (a) the VFCC Group or (b) the Three Pillars Group,  as
the case may be.

     "Group  Percentage"  means,  as to each Group,  the ratio  (expressed  as a
percentage)  which the aggregate  Commitments  of all Committed  Lenders in such
Group bear to the aggregate Commitments of all Committed Lenders in all Groups.

     "Incipient  Bankruptcy"  means  that  any of the  Agents  shall  have  been
informed  by  Borrower,  Servicer  or any of  their  Affiliates  or  shall  have
otherwise  reasonably  determined that Borrower or Servicer is about to commence
or to become the subject of a case or  proceeding  of the type  described in the
definition of "Event of Bankruptcy."

     "Indemnified Amounts" has the meaning set forth in Section 14.1.

     "Indemnified Party" has the meaning set forth in Section 14.1.

     "Interest Period" means:

          (a) with respect to any CP Loan, its CP Tranche Period;

          (b) with respect to any  Alternative  Rate Loan:  (i)  initially,  the
     period  commencing  on the date of the  initial  funding  of such Loan by a
     Committed Lender,  Liquidity Bank or STB, as the case may be, and ending on
     (but excluding) the Business Day  immediately  preceding the next following
     Distribution  Date,  and (ii)  thereafter,  each period  commencing on (and
     including) the Business Day immediately  preceding a Distribution  Date and
     ending on (but excluding) the Business Day  immediately  preceding the next
     following Distribution Date;

provided,  however,  that if any  Interest  Period  for any Loan that  commences
before the Commitment  Termination  Date would otherwise end on a date occurring
after such Commitment  Termination  Date, such Interest Period shall end on such
Commitment  Termination  Date and the duration of each such Interest Period that
commences on or after the Commitment  Termination Date, if any, shall be of such
duration as shall be selected by the applicable Co-Agent.

     "LC Application" has the meaning set forth in Section 2.4(a).

     "LC Fee" has the meaning set forth in the Co-Agents' Fee Letter.

     "LC Issuer" means STB or Wachovia in its capacity as the
issuer of a Letter of Credit.

                                       15
<PAGE>

     "LC Obligations" means, at any time, the sum, without  duplication,  of (a)
the Aggregate Face Amount Outstanding at such time plus (b) the aggregate unpaid
amount at such time of all Reimbursement Obligations.

     "LC Payment Date" is defined in Section 2.4(b).

     "LC Percentage"  means, on any date of determination,  the ratio (expressed
as a percentage)  of (a) the sum of (i) the Aggregate  Face Amount  Outstanding,
plus (ii) any outstanding Reimbursement Obligations, to (b) the Facility Limit.

     "LC Sublimit" means, at any time, the lesser of (a)  $100,000,000,  and (b)
the aggregate of the Commitments.

     "Lenders"  means,  collectively,  the  Conduit  Lenders  and the  Committed
Lenders and "Lender" means anyone of them.

     "Letter  of  Credit"  means a  stand-by  letter of credit  issued by STB or
Wachovia in United States  Dollars for the account of Borrower at the request of
a Seller, as extended from time to time in accordance with this Agreement.

     "Letter of Credit  Collateral  Account" means a segregated  cash collateral
account at each LC Issuer in such LC Issuer's name established at any time after
the  date of this  Agreement  at such LC  Issuer's  request  that is  under  the
exclusive  control of such LC Issuer  (for the benefit of such LC Issuer and the
Lenders).

     "LIBOR  Loan" means a Loan made by a Committed  Lender at any time it bears
interest at a LIBOR Rate.

     "Lender Note" has the meaning set forth in Section 2.7.

     "LIBOR Margin" means 0.75% per annum.

     "LIBOR Rate" means, for any Interest Period, the rate per annum on the Rate
Setting  Day of such  Interest  Period  shown on page  3750 of  Telerate  or any
successor page as the composite  offered rate for London interbank  deposits for
one month,  as shown under the  heading  "USD" as of 11:00 a.m.  (London  time);
provided  that in the event no such rate is shown,  the LIBOR  Rate shall be the
rate per annum (rounded  upwards,  if necessary,  to the nearest  1/100th of one
percent) based on the rates at which Dollar deposits for one month are displayed
on page "LIBOR" of the Reuters Screen as of 11:00 a.m. (London time) on the Rate
Setting Day (it being  understood  that if at least two (2) such rates appear on
such  page,  the rate  will be the  arithmetic  mean of such  displayed  rates);
provided further, that in the event fewer than two (2) such rates are displayed,
or if no such rate is relevant, the LIBOR Rate shall be the rate per annum equal
to the  average of the rates at which  deposits  in Dollars  are  offered by the
applicable  Co-Agent  at  approximately  11:00  a.m.  (London  time) on the Rate
Setting Day to prime banks in the London interbank market for a one month.

     "Liquidity  Agreement"  means any of the VFCC  Liquidity  Agreement  or the
Three Pillars Liquidity Agreement.

                                       16
<PAGE>

     "Liquidity Bank" means any of the VFCC Liquidity Banks or the Three Pillars
Liquidity Banks.

     "Liquidity  Termination  Date"  means,  with respect to each of the Conduit
Lenders,  the earlier to occur of (a)  November  30,  2006,  as such date may be
extended  from  time to  time  by  such  Conduit  Lender's  Liquidity  Banks  in
accordance with its Liquidity  Agreement,  and (b) the occurrence of an Event of
Bankruptcy with respect to such Conduit Lender.

     "Loan" means each  revolving loan made on a given date at a given rate by a
Lender to Borrower pursuant to this Agreement.

     "LockBox" means a postal box maintained on behalf of Borrower
or the Servicer for the purpose of receiving checks and money orders
constituting Collections of the Receivables.

     "LockBox Account" means any of those bank accounts described
on Schedule 8.12 hereto and any additional or replacement account to which Mail
Payments, wire transfers, SWIFT, ACH or other electronic payments are deposited
for clearing.

     "LockBox Account  Agreement"  means an agreement among a Seller,  Borrower,
the  Administrative  Agent and the bank holding any LockBox  Account,  in a form
reasonably acceptable to the Agents.

     "Loss Horizon Ratio" means, on any date of determination:

               (1) Except as provided  in clauses  (2) and (3) below,  the ratio
          (expressed  as a  percentage)  computed as of the last day of the most
          recent  Calculation Period by dividing (a) the sum of (i) Credit Sales
          for  such  Calculation   Period,   plus  (ii)  Credit  Sales  for  the
          immediately  preceding Calculation Period, plus (iii) Credit Sales for
          the second (2nd) immediately  preceding  Calculation Period, plus (iv)
          Credit  Sales for the third (3rd)  immediately  preceding  Calculation
          Period,  plus (v) 53% of Credit Sales for the fourth (4th) immediately
          preceding  Calculation Period, by (b) an amount equal to the Aggregate
          Unpaid  Balance  as of the  last day of the  most  recent  Calculation
          Period,  minus the Aggregate  Excess  Concentration  Amount as of such
          last day;

               (2)  At  any  time  while  Bowater's  unsecured  senior  debt  is
          Split-Rated,  the ratio (expressed as a percentage) computed as of the
          last day of the most recent Calculation Period by dividing (a) the sum
          of (i) Credit  Sales for such  Calculation  Period,  plus (ii)  Credit
          Sales for the  immediately  preceding  Calculation  Period  plus (iii)
          Credit Sales for the second (2nd)  immediately  preceding  Calculation
          Period,  plus  (iv)  Credit  Sales  for the  third  (3rd)  immediately
          preceding  Calculation  Period,  plus (v) 3% of  Credit  Sales for the
          fourth  (4th)  immediately  preceding  Calculation  Period,  by (b) an
          amount equal to the Aggregate Unpaid Balance as of the last day of the
          most  recent   Calculation   Period,   minus  the   Aggregate   Excess
          Concentration Amount as of such last day; and

                                      17
<PAGE>

                  (3) At any time while Bowater's unsecured senior debt is rated
         both "BB+" or less by S&P and "Ba1" or less by Moody's, the ratio
         (expressed as a percentage) computed as of the last day of the most
         recent Calculation Period by dividing (a) the sum of (i) Credit Sales
         for such Calculation Period, plus (ii) Credit Sales for the immediately
         preceding Calculation Period plus (iii) Credit Sales for the second
         (2nd) immediately preceding Calculation Period plus (iv) Credit Sales
         for the third (3rd) immediately preceding Calculation Period, by (b) an
         amount equal to the Aggregate Unpaid Balance as of the last day of the
         most recent Calculation Period, minus the Aggregate Excess
         Concentration Amount as of such last day.

     "Loss Reserve" means, on any date of determination,  the product of (i) the
highest rolling 3-month average Default Ratio over the 12 months ending with the
most recent Calculation  Period,  (ii) the Loss Horizon Ratio as of the last day
of the most recent Calculation Period, and (iii) the Stress Factor.

     "Mail Payments" has the meaning specified in Section
11.2.3(a).

     "Material  Adverse  Effect" means a material  adverse  effect on (a) on the
business,  property, condition (financial or otherwise) or results of operations
or  prospects  of (i) Bowater  and its  Subsidiaries  taken as a whole,  or (ii)
Borrower,  (b) the  ability of  Borrower  or Bowater to perform  its  respective
obligations under this Agreement or any other  Transaction  Document to which it
is a party, (c) the legality, validity or enforceability of the Agreement or any
other Transaction Document, (d) the existence,  validity, perfection or priority
of (i) the  Administrative  Agent's  (for the  benefit of the  Secured  Parties)
security interest in the Collateral,  or (ii) Borrower's  ownership  interest in
the Receivables;  or (e) the validity,  enforceability  or collectibility of the
Receivables generally or of any material portion of the Receivables.

     "Material  Debt"  has  the  meaning   specified  in  the  Receivables  Sale
Agreement.

     "Monthly Report" means a report,  substantially in the form of Exhibit C or
in such other form  acceptable to the Co-Agents,  prepared by Servicer as of the
last day of the most  recent  Calculation  Period  and  signed by an  authorized
Senior Executive of Servicer.

     "Moody's" means Moody's Investors Service, Inc. and its successors.

     "Net Worth"  with  respect to Borrower  has the  meaning  specified  in the
Receivables Sale Agreement.

     "Obligations" means all obligations  (monetary or otherwise) of Borrower to
any  of  the  Secured  Parties  and  their  respective   successors,   permitted
transferees and assigns arising under or in connection with this Agreement,  any
LC Application,  any Lender Note and each other  Transaction  Document,  in each
case,  however  created,  arising  or  evidenced,  whether  direct or  indirect,
absolute  or  contingent,  now or  hereafter  existing,  or due or to become due
(including, without limitation, the LC Obligations).

     "Obligor" means,  with respect to any Receivable,  each Person obligated to
make payments with respect to such Receivable, including any guarantor thereof.


                                    18
<PAGE>

     "Organizational  Documents"  has the meaning  specified in the  Receivables
Sale Agreement.

     "Outstanding  Balance" has the meaning  specified in the  Receivables  Sale
Agreement.

     "Percentage"  means, as to any Committed Lender,  the ratio (expressed as a
percentage) of such Committed Lender's  Commitment to the aggregate  Commitments
of all Committed Lenders in the same Group.

     "Performance Guarantor" means Bowater.

     "Performance  Undertaking"  means a Performance  Undertaking in the form of
Exhibit  E  hereto,  duly  executed  by the  Performance  Guarantor  in favor of
Borrower.

     "Permitted Investment" means, at any time:

          (a) marketable  obligations  issued by, or the full and timely payment
     of which is directly and fully  guaranteed or insured by, the United States
     government or any other government with an equivalent rating, or any agency
     or instrumentality  thereof when such marketable  obligations are backed by
     the full  faith and credit of the United  States  government  or such other
     equivalently  rated  government,  as the case  may be,  but  excluding  any
     securities which are derivatives of such obligations;

          (b) time deposits, bankers' acceptances and certificates of deposit of
     any domestic  commercial  bank or any United  States  branch or agency of a
     foreign  commercial  bank  which (i) has  capital,  surplus  and  undivided
     profits  in excess of  $100,000,000  and  which has a  commercial  paper or
     certificate of deposit rating meeting the requirements  specified in clause
     (c) below (or  equivalent  rating from the Rating  Agencies) or (ii) is set
     forth in a list  (which may be updated  from time to time) (A)  approved by
     the  Agents  and (B) with  respect  to which a written  statement  has been
     obtained from each of the applicable Rating Agencies to the effect that the
     rating of the  Commercial  Paper Notes rated by them will not be downgraded
     or withdrawn solely as a result of the acquisition of such investments;

          (c)  commercial  paper  which  is (i)  rated  at  least as high as the
     Commercial Paper Notes by the Rating Agencies,  or (ii) set forth in a list
     (which may be updated from time to time) (A) approved by the Agents and (B)
     with respect to which a written  statement  has been  obtained from each of
     the  applicable  Rating  Agencies  to the  effect  that the  rating  of the
     Commercial  Paper Notes rated by them will not be  downgraded  or withdrawn
     solely as a result of the acquisition of such investments;

          (d) secured  repurchase  obligations for underlying  securities of the
     types  described in clauses (a) and (b) above entered into with any bank of
     the type described in clause (b) above; and

                                       19
<PAGE>

          (e) freely  redeemable  shares in (i) money  market or  similar  funds
     which invest solely in obligations,  bankers'  acceptances,  time deposits,
     certificates of deposit,  repurchase agreements and commercial paper of the
     types  described  in clauses (a) through (d) above,  without  regard to the
     limitations as to the maturity of such obligations,  bankers'  acceptances,
     time deposits, certificates of deposit, repurchase agreements or commercial
     paper set forth  below,  which are rated at least  "AAm" or "AAmg" or their
     equivalent   by  both  S&P  and   Moody's,   provided   that  there  is  no
     "r-highlighter"  affixed to such  rating,  and (ii) the money  market  fund
     called Nations Cash Reserves, so long as Nations Cash Reserves continues to
     buy only "first tier"  securities as defined by Rule 2a-7 of the Investment
     Company Act of 1940.

     "Person" has the meaning set forth in the Receivables Sale Agreement

     "Pooled  Commercial  Paper" means Commercial Paper Notes of VFCC subject to
any  particular  pooling  arrangement  by such  Conduit  Lender,  but  excluding
Commercial  Paper  Notes  issued by such  Conduit  Lender  for a tenor and in an
amount  specifically  requested by any Person in  connection  with any agreement
effected by such Conduit Lender.

     "Prime  Rate" means as of any date of  determination,  the rate of interest
most recently announced in the Wall Street Journal as the "prime rate."

     "Procedures  Review"  means  a  report  of  independent   certified  public
accountants selected by the Agents which satisfies the requirements set forth on
Schedule 9.1.5.

     "Program  Documents" means, as to each of the Conduit Lenders,  its Support
Agreements,  the  documents  under which the  applicable  Co-Agent  performs its
obligations with respect to such Conduit  Lender's  commercial paper program and
the other  documents to be executed and  delivered in connection  therewith,  as
amended, supplemented, restated or otherwise modified from time to time.

     "Prox Receivable" means a Receivable for which the applicable
invoice has "prox terms", i.e., requires payment to be made by a specified
numerical day in the month following the date on which such invoice is issued.

     "Prox  Rules" means that the terms of any  Receivable  shall be a number of
days  determined  as follows:  (a) for any Prox  Receivable,  the sum of (i) the
numerical  day of the month on which such  Receivable  becomes due and  payable,
plus (ii) 15 days, and (b) for any other  Receivable,  the actual number of days
after the invoice date until such Receivable becomes due.

     "Purchase Price Credit" has the meaning set forth in the  Receivables  Sale
Agreement

     "Rate Setting Day" means,  for any Interest  Period,  two (2) Business Days
prior to the commencement of such Interest Period.  In the event such day is not
a Business  Day,  then the Rate Setting Day shall be the  immediately  preceding
Business Day.

                                       20
<PAGE>

     "Rating Agency" means (a) S&P, (b) Moody's, and (c) solely to the extent it
is rating any of the Commercial Paper Notes of any Conduit Purchaser, Fitch.

     "Receivable" has the meaning specified in the Receivables Sale Agreement.

     "Receivable  File" means with  respect to a  Receivable,  (a) the  Contract
giving rise to the Receivable and other  evidences of the Receivable  including,
without  limitation,  electronic files,  tapes,  discs,  punch cards and related
property and rights and (b) each UCC financing  statement  related  thereto,  if
any.

     "Receivables  Sale  Agreement"  means the Amended and Restated  Receivables
Sale Agreement,  dated as of December 1, 2005, by and among Sellers, as sellers,
and Borrower, as buyer, as such agreement may be amended, supplemented, restated
or otherwise  modified from time to time with the prior written  consent of each
of the Agents.

     "Regulatory Change" means, relative to any Affected Party:

          (a) any  change  in (or the  adoption,  implementation,  change in the
     phase-in or change in the commencement of effectiveness of) any: (i) United
     States  Federal or state law or foreign  law  applicable  to such  Affected
     Party, (ii) regulation,  interpretation,  directive, requirement or request
     (whether or not having the force of law)  applicable to such Affected Party
     of (A) any court or government authority charged with the interpretation or
     administration  of any law  referred  to in  clause  (a)(i),  or of (B) any
     fiscal,  monetary or other authority having jurisdiction over such Affected
     Party, or (iii) GAAP or regulatory accounting principles applicable to such
     Affected Party and affecting the  application to such Affected Party of any
     law, regulation, interpretation, directive, requirement or request referred
     to in clause (a)(i) or (a)(ii) above or requiring the  consolidation of any
     Conduit Lender's assets and liabilities with those of its Co-Agent;

          (b) any  change  in the  application  to such  Affected  Party  of any
     existing law, regulation,  interpretation,  directive, requirement, request
     or accounting principles referred to in clause (a)(i),  (a)(ii) or (a)(iii)
     above;

          (c)  the  issuance,   publication   or  release  of  any   regulation,
     interpretation,  directive,  requirement  or request of a type described in
     clause  (a)(ii) above to the effect that the  obligations  of any Liquidity
     Bank under the  Liquidity  Agreement are not entitled to be included in the
     zero  percent  category of  off-balance  sheet  assets for  purposes of any
     risk-weighted  capital guidelines  applicable to such Liquidity Bank or any
     related Affected Party; or

          (d) any  change  in (or the  adoption,  implementation,  change in the
     phase-in  or  commencement  of  effectiveness  of) any  GAAP or  regulatory
     accounting  principle  applicable  to such  Affected  Party  requiring  the
     consolidation,  in whole or in part, of any Conduit  Lender's assets and/or
     liabilities, with those of its Co-Agent or any of its Liquidity Banks.

                                       21
<PAGE>

     "Reimbursement Obligations" means, at any time, the aggregate
of all obligations of Borrower then outstanding under Section 2.4(c) to
reimburse the LC Issuers for amounts paid by the LC Issuers in respect of any
one or more drawings under the Letters of Credit.

     "Related  Commercial  Paper"  means,  for any  period  with  respect to any
Conduit  Lender,  any  Commercial  Paper Notes of such Conduit  Lender issued or
deemed issued for purposes of financing or maintaining  any Loan by such Conduit
Lender (including any discount,  yield, or interest thereon)  outstanding on any
day during such period.

     "Related  Security"  has the  meaning  specified  in the  Receivables  Sale
Agreement.

     "Required Capital Amount" has the meaning specified in the Receivables Sale
Agreement.

     "Requirements  of Law" for any Person or any of its property shall mean the
Organizational Documents of such Person or any of its property, and any statute,
law,  treaty,  rule  or  regulation,   or  determination  of  an  arbitrator  or
Governmental  Authority,  in each case applicable to or binding upon such Person
or any of its  property  or  businesses  or to which  such  Person or any of its
property or businesses is subject, whether federal, state or local.

     "Reserve Floor" means, for any Calculation  Period, the greater of (a) 15%,
and (b) the sum of (i) 3% plus  (ii)  the  percentage  of the  Aggregate  Unpaid
Balance  represented  by the Top 4 Designated  Balances as reflected on the most
recent Monthly Report delivered by Servicer

     "Reserve  Percentage"  means,  for any Calculation  Period,  the percentage
equal to the greater of (a) the sum of (i) the Loss  Reserve,  (ii) the Dilution
Reserve,  (iii) the Yield Reserve,  and (iv) the Servicing Reserve,  and (b) the
Reserve Floor.

     "S&P" means Standard & Poor's Ratings Group, a division of The  McGraw-Hill
Companies, Inc.

     "Scheduled  Commitment  Termination  Date"  means  November  30,  2006,  as
extended from time to time by mutual agreement of the parties hereto.

     "Secured  Parties"  means the Lenders,  the LC Issuers,  the Agents and the
Indemnified  Parties,  and the successors  and permitted  assigns of each of the
foregoing.

     "Sellers" has the meaning specified in the Receivables Sale Agreement.

     "Senior Executive" has the meaning specified in the
Receivables Sale Agreement.

     "Servicer" means Bowater or any successor Servicer appointed as provided in
Section 11.5.

     "Servicer  Event of Default"  shall have the meaning  specified  in Section
11.7.

                                       22
<PAGE>

     "Servicing Fee" means, as to any Calculation Period, the fee payable to the
Servicer  which,  so long as Bowater or one of its  Affiliates  is the Servicer,
shall be equal to the  Servicing Fee Rate  multiplied  by the  Aggregate  Unpaid
Balance at the beginning of such Calculation  Period.  The Servicing Fee for any
successor  Servicer shall be equal to the fee reasonably agreed to by the Agents
and such successor Servicer.

     "Servicing Fee Rate" means 1.80% per annum.

     "Servicing  Reserve" means, on any date of  determination,  the product of:
(a) the highest Day Sales Outstanding Ratio during the 12 months ending with the
most recent Calculation Period, (b) the Stress Factor, (c) 2.40%, and (d) 1/360.

     "Significant Event" means any Amortization Event or Event of Default.

     "Special  Obligor"  means  any  one of  not  more  than  two  (2)  Obligors
designated by Borrower from time to time,  which is unrated or, if rated,  has a
short term credit rating of less than A-2 by S&P or less than P-2 by Moody's, or
a long term credit  rating of less than BBB- by S&P and Baa3 by Moody's,  unless
and until the Administrative Agent, at the direction of any Co-Agent,  gives not
less than five (5) Business  Days' notice to Borrower  that it is revoking  such
Person's special status.

     "Split-Rated"  means that Bowater's  unsecured  senior debt is either rated
"BB+" or less by S&P or "Ba1" or less by Moody's, but not both.

     "Standby  Letter of Credit" means an  irrevocable  standby letter of credit
for the  account of  Borrower  at the request of a Seller and for the benefit of
any holder of obligations of a Seller or its Affiliates.

     "STB" has the meaning set forth in the preamble to this Agreement.

     "STCM" has the meaning set forth in the preamble to this Agreement.

     "Stress Factor" means (a) at any time while Bowater's unsecured senior debt
is rated  greater than or equal to both "BB" by S&P and "Ba2" by Moody's,  2.00,
(b) at any time while Bowater's  unsecured  senior debt is rated greater than or
equal to both  "B+" by S&P and "B1" by  Moody's  but less  than the  ratings  in
clause (a), 2.25, and (c) at any time while Bowater's  unsecured  senior debt is
rated less than either of the ratings described in clause (b), 2.50.

     "Subsidiary" has the meaning specified in the Receivable Sale Agreement.

     "Support Agreement" means and includes any credit agreement,
letter of credit, surety bond or other instrument or insurance policy pursuant
to which any Conduit Lender receives credit enhancement or liquidity enhancement
for the Related Commercial Paper or for its Commercial Paper Notes generally,
including, without limitation, as to each Conduit Lender, its Liquidity
Agreement.

                                       23
<PAGE>

     "Support Provider" means and includes any entity now or hereafter extending
credit or liquidity support or having a commitment to extend credit or liquidity
support to or for the  account  of, or to make  loans to or  purchases  from,  a
Conduit Lender or issuing a letter of credit, surety bond or other instrument to
support any obligations arising under or in connection with the commercial paper
program of a Conduit Lender,  including,  without limitation, as to each Conduit
Lender, its Liquidity Banks.

     "Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions,  charges or withholdings, and any and all liabilities (including but
not limited to interest and penalties) with respect to the foregoing, imposed by
any Governmental Authority.

     "Telerate  Page 3750" shall mean the display  designated  as "Page 3750" on
the  Telerate  Service  (or such other page as may  replace  "Page 3750" on that
service  or  another  service  as  may be  nominated  by  the  British  Bankers'
Association  as the  information  vendor for the purpose of  displaying  British
Bankers' Association Interest Settlement Rate for Dollars).

     "Three  Pillars"  has  the  meaning  set  forth  in the  preamble  to  this
Agreement.

     "Three Pillars Agent" has the meaning set forth in the
preamble to this Agreement.

     "Three Pillars Group" means,  collectively,  (a) Three Pillars, (b) STB and
its  successors  and  permitted  assigns as Committed  Lenders or Three  Pillars
Liquidity Banks, and (c) STB in its capacity as an LC Issuer.

     "Three Pillars Liquidity  Agreement" means (a) the Liquidity Asset Purchase
Agreement (regarding Bowater Funding Inc.), dated as of December 19, 2002, among
Three Pillars,  STB, as liquidity agent for the Three Pillars  Liquidity  Banks,
the Three Pillars Agent, and the Three Pillars Liquidity Banks, or (b) any other
agreement  hereafter  entered into by Three  Pillars  providing  for the sale by
Three  Pillars  of its Loans (or  portions  thereof),  or the making of loans or
other  extensions  of credit to Three Pillars  secured by security  interests in
Three  Pillar's  Loans (or  portions  thereof),  to support all or part of Three
Pillar's payment  obligations  under the Commercial Paper Notes or to provide an
alternate means of funding Three Pillar's  investments in accounts receivable or
other  financial  assets,  in each case as  amended,  supplemented,  restated or
otherwise modified from time to time.

     "Three Pillars  Liquidity Banks" means STB and its successors and permitted
assigns under the Three Pillars Liquidity Agreement.

     "Top 4  Designated  Balances"  means,  on any  date of  determination,  the
aggregate of the Outstanding Balance of all Eligible  Receivables owing from the
Special Obligors and unrated Obligors with the four highest Outstanding Balances
of Eligible  Receivables  (after deducting any portion thereof which is excluded
from the Borrowing Base because such aggregate  Outstanding  Balance exceeds the
applicable Concentration Limit).

     "Transaction   Documents"  means  this  Agreement,   the  Receivables  Sale
Agreement,  the  Lender  Notes,  the  Fee  Letters,  the  LC  Applications,  the
Performance  Undertaking and the other  instruments,  certificates,  agreements,
reports and documents to be

                                       24
<PAGE>

executed and delivered  under or in connection  with
this Agreement or the Receivables Sale Agreement (except the Program Documents),
as any of the foregoing may be amended,  supplemented,  amended and restated, or
otherwise modified from time to time in accordance with this Agreement.

     "UCC" means the Uniform  Commercial  Code as from time to time in effect in
the applicable jurisdiction or jurisdictions.

     "Unmatured Servicer Event of Default" means any event that, if it continues
uncured,  will,  with  lapse of time or  notice  or  lapse  of time and  notice,
constitute a Servicer Event of Default.

     "Unmatured  Significant  Event"  means  any  event  that,  if it  continues
uncured,  will,  with  lapse of time or  notice  or  lapse  of time and  notice,
constitute a Significant Event.

     "Unpaid Balance" means, with respect to any Receivable,  the sum of (a) the
Outstanding Balance thereof, plus (without  duplication),  and (b) the aggregate
amount  required to repay in full all interest,  finance,  prepayment  and other
fees or charges of any kind payable in respect of, such Outstanding Balance.

     "VFCC" has the meaning set forth in the preamble to this Agreement.

     "VFCC Agent" has the meaning set forth in the preamble to this Agreement.

     "VFCC Group" means, collectively, (a) VFCC, (b) Wachovia and its successors
and permitted  assigns as Committed  Lenders or VFCC  Liquidity  Banks,  and (c)
Wachovia in its capacity as an LC Issuer.

     "VFCC Liquidity Agreement" means (a) that certain liquidity
purchase agreement dated as of December 1, 2005 by and among VFCC, the VFCC
Liquidity Banks and Wachovia, as VFCC Agent and liquidity agent or (b) any other
agreement hereafter entered into by any Conduit Lender that is an assignee of
VFCC providing for the sale by such Conduit Lender of its Loans (or portions
thereof), or the making of loans or other extensions of credit to such Conduit
Lender secured by security interests in such Conduit Lender's Loans (or portions
thereof), to support all or part of such Conduit Lender's payment obligations
under the Commercial Paper Notes or to provide an alternate means of funding
such Conduit Lender's investments in accounts receivable or other financial
assets.

     "VFCC Liquidity Banks" means Wachovia and its successors and
permitted assigns under the VFCC Liquidity Agreement.

     "Wachovia" has the meaning set forth in the preamble to this Agreement.

     "Yield Reserve" means, on any date of determination, the product of (a) the
highest Day Sales  Outstanding  Ratio during the 12 months  ending with the most
recent  Calculation  Period,  (b) the  Stress  Factor,  (c) the Prime Rate as in
effect on the last day of such Calculation Period and (d) 1/360.

                                       25
<PAGE>

Section 1.2       Other Definitional Provisions.

          (a) Unless  otherwise  specified  therein,  all terms  defined in this
     Agreement  have the  meanings  as so defined  herein when used in any other
     Transaction  Document,  certificate,  report  or  other  document  made  or
     delivered pursuant hereto.

          (b) Each term defined in the singular form in Section 1.1 or elsewhere
     in this  Agreement  shall mean the plural  thereof  when the plural form of
     such  term is used in this  Agreement  or any other  Transaction  Document,
     certificate,  report or other document made or delivered  pursuant  hereto,
     and each term  defined  in the plural  form in  Section  1.1 shall mean the
     singular  thereof  when the  singular  form of such term is used  herein or
     therein.

          (c) The words "hereof,"  "herein,"  "hereunder" and similar terms when
     used in this Agreement  shall refer to this Agreement as a whole and not to
     any  particular  provision  of  this  Agreement,   and  article,   section,
     subsection,  schedule  and  exhibit  references  herein are  references  to
     articles, sections,  subsections,  schedules and exhibits to this Agreement
     unless otherwise specified.

     Section 1.3 Other Terms.  All  accounting  terms not  specifically  defined
herein shall be construed in accordance  with GAAP.  All terms used in Article 9
of the UCC and not  specifically  defined herein,  are used herein as defined in
such Article 9.

     Section 1.4 Computation of Time Periods.  Unless  otherwise  stated in this
Agreement,  in the  computation  of a period of time from a specified  date to a
later  specified  date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."

     Section 1.5 Continuance of Significance Events. For the avoidance of doubt,
from and after the  time,  if any,  when an event  becomes a  Servicer  Event of
Default,  an  Amortization  Event or an Event of  Default,  such event  shall be
deemed  to be  continuing  until  waived  in  writing  in  accordance  with  the
provisions of this Agreement  regardless of whether the circumstance  which gave
rise thereto continues to exist.

                                  ARTICLE II.
           COMMITMENTS, BORROWING AND LETTER OF CREDIT PROCEDURES AND
                                  LENDER NOTES

     Section 2.1  Commitments.  On the terms and subject to the  conditions  set
forth in this Agreement,  from time to time prior to the Commitment  Termination
Date:

          (a)  Advances.  Borrower  may  request  Advances  from the  Lenders in
accordance with Section 2.2. Upon receipt of each Borrowing Request:

          (i) Each of the Conduit  Lenders may, in its sole  discretion,  make a
     Loan to Borrower in a principal amount equal to such Conduit Lender's Group
     Percentage of the principal  amount of the requested  Advance (such Conduit
     Lender's and its Group's "Funding Amount"); and

                                       26
<PAGE>

          (ii) In the event that any Conduit Lender declines to make its Loan to
     Borrower as part of any requested  Advance,  each of such Conduit  Lender's
     related  Committed Lenders severally agrees to make a Loan to Borrower in a
     principal amount equal to its Percentage of the applicable Conduit Lender's
     Funding Amount;

provided,  however,  that  the  aggregate  Credit  Exposure  from  time  to time
outstanding  hereunder shall not exceed the lesser of (x) the Facility Limit and
(y) the Borrowing  Base,  and provided,  further,  that the aggregate  principal
amount of all Loans from time to time outstanding from any Group hereunder shall
not exceed its Group  Percentage of the lesser of (x) the Facility Limit and (y)
the Borrowing Base. Within the limits of each Committed Lender's  Commitment and
the Facility  Limit,  Borrower may borrow and (subject to Section 4.1(a)) prepay
and reborrow under this Section 2.1(a).

          (b)  Issuance of Letters of Credit.  Borrower  may request  that an LC
Issuer issue  Letters of Credit,  and the  applicable LC Issuer hereby agrees to
issue each requested Letter of Credit and to renew, extend,  increase,  decrease
or otherwise  modify each Letter of Credit issued by it ("Modify," and each such
action,  including,  without  limitation,  an automatic extension pursuant to an
evergreen  feature,  a  "Modification"),  from time to time upon the  request of
Borrower; provided that no Letter of Credit shall be issued or Modified by an LC
Issuer if, after giving effect thereto,  (i) the aggregate Credit Exposure would
exceed  the  Facility  Limit,  or (ii) the LC  Obligations  would  exceed the LC
Sublimit;  and provided,  further, that each Letter of Credit issued pursuant to
this  Section  2.1(b) shall have a face amount of not less than  $1,000,000.  No
Letter of Credit shall have a stated expiry date later than 1 year from the date
of issuance or Modification, although it may contain an evergreen feature.

     Section 2.2 Borrowing Procedures.  Borrower (or the Servicer on its behalf)
may  request an Advance  hereunder  by  delivering  a  Borrowing  Request to the
Co-Agents not later than 2:00 p.m. (New York City time), three (3) Business Days
prior to the proposed date of such  borrowing;  provided that Borrower shall not
request,  and Lenders shall not make,  Advances more than once per calendar week
and provided, further, that such 3-Business Day notice period shall be shortened
to a 2-Business  Day notice period to the extent  necessary to permit funding by
the  applicable  LC Payment Date of a drawing  under a Letter of Credit with the
proceeds  of an  Advance.  Each  Borrowing  Request  given by  Borrower  (or the
Servicer on its behalf)  pursuant to this Section 2.2 shall be  irrevocable  and
binding on  Borrower.  Any  Borrowing  Request  may be  delivered  by  facsimile
transmission or by electronic  mail message  attaching a portable data format or
".pdf" file containing an image of the signed request,  provided,  however, that
no such facsimile  transmission or electronic mail message shall be deemed to be
delivered  unless and until  Borrower (or  Servicer on its behalf)  confirms the
Co-Agents' actual receipt thereof (not merely via voice mail) by telephone. Upon
the Co-Agents'  receipt of each Borrowing  Request,  each of them shall promptly
determine whether its Conduit Lender or its Committed Lender(s) will participate
in funding the requested Advance.

     Section  2.3  Funding.  Subject  to  the  satisfaction  of  the  conditions
precedent  set  forth  in  Article  VII with  respect  to such  Advance  and the
limitations set forth in Section 2.1(a),  each Lender shall make the proceeds of
its Loan comprising a portion of such requested Advance available to its Group's
Co-Agent in immediately available funds on the proposed date of


                                       27
<PAGE>

borrowing.  Upon receipt by a Co-Agent of such Loan proceeds, such Co-Agent will
make such funds  available to Borrower's  Account on such date.  Each  borrowing
shall be on a  Business  Day and  shall be in an  aggregate  amount  of at least
$1,000,000 per Group or in a larger integral multiple of $200,000 per Group.

        Section 2.4        Letters of Credit.

          (a) Letter of Credit Requests.  Subject to Section 2.1, Borrower shall
give the applicable LC Issuer and each Co-Agent  reasonable  prior notice of the
proposed  date of issuance or  Modification  of each Letter of Credit (and in no
event  shall such  notice be given  later than 12:00 noon (New York time)  three
Business Days prior to such issuance or  Modification),  by delivering a copy of
the Letter of Credit Request  provided to it under the Sale Agreement,  together
with a transmittal  letter in substantially  the form of Exhibit F hereto,  duly
completed  by  Borrower.  The  issuance or  Modification  by an LC Issuer of any
Letter of Credit  shall,  in addition to the  conditions  precedent set forth in
Article VII, be subject to the  conditions  precedent that such Letter of Credit
shall be reasonably  satisfactory  to the applicable LC Issuer and that Borrower
shall have executed and delivered such  application  agreement and/or such other
instruments  and agreements  relating to such Letter of Credit as the applicable
LC Issuer shall have reasonably  requested  (each, an "LC  Application").  In no
event  shall an LC  Issuer  be  obligated  to issue a  Modification  if,  on the
proposed  date of such  Modification,  such LC Issuer  would not be obligated to
issue new Letters of Credit if requested or if the beneficiary  does not consent
to the proposed terms of the Modification.  In the event of any conflict between
the terms of this  Agreement and the terms of any LC  Application,  the terms of
this Agreement shall control.

          (b)  Reimbursement  by Borrower.  Upon receipt from the beneficiary of
any Letter of Credit of any demand for payment under such Letter of Credit,  the
applicable LC Issuer shall notify the Co-Agents and Borrower as to the amount to
be paid by such LC Issuer as a result of such  demand and the  proposed  payment
date which, except to the extent otherwise required by applicable law, shall not
be less than two (2) Business Days after receipt of such demand (the "LC Payment
Date" ). The  responsibility  of the  applicable LC Issuer to Borrower  shall be
only to  determine  that the  documents  (including  each  demand  for  payment)
delivered  under each  Letter of Credit  issued by such LC Issuer in  connection
with such presentment  shall be in conformity in all material respects with such
Letter of Credit. Borrower shall be irrevocably and unconditionally obligated to
reimburse the  applicable LC Issuer on or before the  applicable LC Payment Date
for any amounts to be paid by such LC Issuer  upon any drawing  under any Letter
of  Credit  issued  by  it,  without  presentment,   demand,  protest  or  other
formalities  of any kind,  either from cash on hand or, subject to the terms and
conditions hereof, with the proceeds of an Advance; provided that Borrower shall
not  hereby  be  precluded   from  asserting  any  claim  for  direct  (but  not
consequential)  damages  suffered by  Borrower  to the  extent,  but only to the
extent,  caused by (i) the willful  misconduct  or gross  negligence  of such LC
Issuer or (ii) such LC Issuer's failure to pay under any Letter of Credit issued
by it after the  presentation  to it of a request  strictly  complying  with the
terms and  conditions  of such Letter of Credit.  All such  amounts  paid by the
applicable LC Issuer and remaining unpaid by Borrower (whether from cash on hand
or with the proceeds of an Advance made in accordance with this Agreement) shall
bear interest,  payable on each Distribution Date in arrears, for each day until
paid at a rate per annum equal to the Default  Rate.  Regardless  of whether the
applicable  LC Payment Date has occurred,


                                       28
<PAGE>

the  Co-Agents  are hereby  irrevocably  directed  to pay the  proceeds  of each
Advance made while any Reimbursement  Obligation remains outstanding directly to
the LC  Issuers  (ratably  in  accordance  with their  respective  Reimbursement
Obligations) until all such Reimbursement Obligations, together with all accrued
and  unpaid  interest  and  LC  Fees  thereon,  are  paid  in  full.  Borrower's
Reimbursement  Obligations  and  obligation  to pay  Interest  pursuant  to this
Section 2.4(b) shall be secured by the Collateral.

          (c) Obligations  Absolute.  Borrower's  obligations under this Section
2.4 shall be absolute  and  unconditional  under any and all  circumstances  and
irrespective  of (i) any lack of  validity or  enforceability  of such Letter of
Credit,  this Agreement,  or any other agreement or instrument relating thereto;
(ii) the existence of any claim,  counterclaim,  set-off, defense or other right
that Borrower or any Seller may have at any time against any  beneficiary or any
transferee of such Letter of Credit (or any Person for whom any such beneficiary
or any such  transferee  may be acting),  the  applicable LC Issuer or any other
person, whether in connection with this Agreement, the transactions contemplated
hereby  or by such  Letter of Credit or any  agreement  or  instrument  relating
thereto, or any unrelated transaction;  (iii) any draft, demand,  certificate or
other  document  presented  under  such  Letter of Credit  proving to be forged,
fraudulent,  invalid or insufficient  in any respect  (provided that such draft,
demand,  certificate  or other  document  presented  pursuant  to such Letter of
Credit  appears on its face to comply with the terms  thereof) or any  statement
therein being untrue or  inaccurate in any respect;  or any loss or delay in the
transmission  or otherwise  of any document  required in order to make a drawing
under such Letter of Credit;  (iv) any payment by the applicable LC Issuer under
such Letter of Credit against  presentation of a draft or certificate  that does
not strictly comply with the terms of such Letter of Credit  (provided that such
draft,  demand,  certificate or other document presented pursuant to such Letter
of Credit appears on its face to comply with the terms thereof);  or any payment
made by the  applicable  LC Issuer  under  such  Letter of Credit to any  Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the
benefit  of  creditors,  liquidator,  receiver  or  other  representative  of or
successor  to any  beneficiary  or any  transferee  of such  Letter  of  Credit,
including any arising in connection  with any  proceeding  under the  Bankruptcy
Code  of  the  United  States,  or  any  other   liquidation,   conservatorship,
bankruptcy, assignment for the benefit of creditors, moratorium,  rearrangement,
receivership,  insolvency,  reorganization, or similar debtor relief laws of the
United States or other applicable  jurisdictions from time to time in effect and
affecting  the  rights of  creditors  generally;  (v) any  exchange,  release or
non-perfection  of any  collateral,  or any release or amendment or waiver of or
consent to the departure from any guarantee,  for all or any of the  obligations
of Borrower or any Seller in respect of any Letter of Credit;  or (vi) any other
circumstance  or  happening  whatsoever,  whether  or not  similar to any of the
foregoing,  including any other  circumstance that might otherwise  constitute a
defense  available to, or a discharge  of,  Borrower of the  applicable  Seller,
provided that Borrower  shall not hereby be precluded  from  asserting any claim
for direct (but not  consequential)  damages suffered by Borrower to the extent,
but only to the extent, caused by (i) the willful misconduct or gross negligence
of the  applicable LC Issuer or (ii) the  applicable LC Issuer's  failure to pay
under  any  Letter of Credit  issued  by it after  the  presentation  to it of a
request  strictly  complying  with the terms and  conditions  of such  Letter of
Credit. Borrower shall promptly examine a copy of each Letter of Credit and each
amendment  thereto  that is  delivered  to it, and, in the event of any claim of
noncompliance with Borrower's instructions or other irregularity,  Borrower will
immediately  (and in any event within 5 Business  Days) notify the applicable LC
Issuer.  Borrower  shall

                                       29
<PAGE>

be  conclusively  deemed to have waived any such claim against the LC Issuer and
its correspondents unless such notice is given as aforesaid.

          (d)  Actions  of LC  Issuers.  With  respect to any  actions  taken or
omitted in the absence of gross negligence or willful misconduct, the applicable
LC Issuer  shall be entitled to rely,  and shall be fully  protected in relying,
upon  any  Letter  of  Credit,  draft,  writing,  resolution,  notice,  consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message,  statement,  order or other  document  believed by it to be genuine and
correct and to have been signed,  sent or made by the proper  Person or Persons,
and upon advice and statements of legal  counsel,  independent  accountants  and
other experts selected by such LC Issuer.

          (e)  Participations.  By the  issuance  of a Letter of  Credit  (or an
amendment to a Letter of Credit  increasing the amount  thereof) and without any
further action on the part of the applicable LC Issuer or the Committed Lenders,
each LC Issuer hereby grants to each Committed Lender, and each Committed Lender
hereby acquires from such LC Issuer,  a  participation  in such Letter of Credit
equal to such Committed Lender's Percentage of the aggregate amount available to
be drawn under such Letter of Credit. In consideration and in furtherance of the
foregoing, each Committed Lender hereby absolutely and unconditionally agrees to
pay to the applicable LC Issuer, such Committed Lender's Percentage of each draw
honored by such LC Issuer  pursuant to a Letter of Credit and not  reimbursed by
Borrower  on  the  date  due as  provided  in  this  Section  2.4(e),  or of any
reimbursement  payment required to be refunded to Borrower for any reason.  Each
Committed  Lender  acknowledges  and  agrees  that  its  obligation  to  acquire
participations  pursuant  to this  paragraph  in respect of Letters of Credit is
absolute  and  unconditional  and  shall  not be  affected  by any  circumstance
whatsoever,  including  any  amendment,  renewal or  extension  of any Letter of
Credit or the occurrence and continuance of a Significant  Event or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset,  abatement,  withholding  or  reduction  whatsoever.  The  Committed
Lenders  shall be entitled to receive  their  ratable  shares of any LC Fees and
interest  actually  collected  by the LC Issuers,  but in no event shall they be
entitled to share in any other fees, commissions, charges or expenses payable to
the LC Issuers.

          (f) LC Issuer  Agreements.  At any time  while any Letter of Credit or
Reimbursement  Obligation  remains  outstanding,  (i) not  later  than the fifth
Business Day of each month, each LC Issuer shall deliver a written report to the
Co-Agents  summarizing  the daily  activity  (set  forth by day) in  respect  of
Letters  of  Credit  during  the  immediately  preceding  month,  including  all
issuances,   extensions,   amendments   and  renewals,   all   expirations   and
cancellations and all disbursements and reimbursements, (ii) on or prior to each
Business Day on which an LC Issuer expects to issue,  amend, renew or extend any
Letter  of  Credit  (including,  without  limitation,  renewals  and  extensions
pursuant to evergreen  clauses),  each LC Issuer  shall advise the  Co-Agents in
writing of the date of such issuance,  amendment,  renewal or extension, and the
aggregate face amount of the Letters of Credit to be issued, amended, renewed or
extended by it and outstanding after giving effect to such issuance,  amendment,
renewal or extension occurred (and whether the amount thereof changed), (iii) on
each  Business  Day on which such LC Issuer  makes any payment to a  beneficiary
pursuant to a Letter of Credit,  such LC Issuer  shall  advise the  Co-Agents in
writing  of the date and amount of such  payment,  (iv) on any  Business  Day on
which  Borrower  fails to reimburse a  Reimbursement  Obligation  required to

                                       30
<PAGE>

be  reimbursed  to such LC Issuer on such day,  such LC Issuer  shall advise the
Co-Agents  in  writing of the date and  amount of such  failure,  and (v) on any
other  Business Day, such LC Issuer shall provide the Co-Agents  with such other
information  relevant  to the  Letters  of  Credit as any of the  Co-Agents  may
reasonably  request.  Each LC Issuer shall invoice Borrower for LC Fees no later
than the 5th Business Day immediately  preceding each  Distribution  Date (which
invoice may be combined  with the invoice  described  in Section  3.5) and shall
disburse each Committed  Lender's share of LC Fees and interest received by such
LC Issuer within one Business Day after such LC Issuer's receipt thereof.

     Section 2.5  Representation  and  Warranty.  Submission  of each  Borrowing
Request or LC Application shall  automatically  constitute a representation  and
warranty by Borrower to the Agents,  the LC Issuers and the Lenders  that on the
date of such  requested  Credit Event:  (a) the  representations  and warranties
contained in Article VIII will be true and correct as of such  requested date as
though made on such date,  (b) no  Significant  Event or  Unmatured  Significant
Event has occurred and is continuing or will result from such Credit Event,  and
(c) after giving effect to such  requested  Credit Event,  the aggregate  Credit
Exposure  will not  exceed  the lesser of the  Borrowing  Base and the  Facility
Limit.

     Section 2.6 Extension of the Committed Lenders' Commitments.  The Committed
Lenders' several  Commitments shall all terminate on the Commitment  Termination
Date. Notwithstanding the foregoing:

          (a) Not more than 60 days prior to any Group's  Liquidity  Termination
     Date in effect from time to time,  Borrower may request that the applicable
     Co-Agent  seek the  applicable  Liquidity  Banks'  consent  to  extend  the
     applicable  Liquidity  Termination Date for a period which, when aggregated
     with the number of days remaining until the existing Liquidity  Termination
     Date would not cause such Liquidity Banks'  commitments under the Liquidity
     Agreement  as so extended to exceed 364 days in toto unless such  agreement
     to extend is made within the final 30 days prior to such  Group's  existing
     Liquidity  Termination  Date, in which case the Liquidity  Termination Date
     shall be extended for a period of 364 days from such existing date, and

          (b)  Not  more  than  60  days  prior  to  the  Scheduled   Commitment
     Termination Date in effect from time to time, Borrower may request that the
     Lenders unanimously consent to extend the Scheduled Commitment  Termination
     Date for a period which,  when aggregated with the number of days remaining
     until the existing  Scheduled  Commitment  Termination Date would not cause
     the Committed Lenders'  Commitments  hereunder as so extended to exceed 364
     days in toto  unless such  agreement  to extend is made within the final 30
     days prior to the existing Scheduled Commitment  Termination Date, in which
     case the Liquidity  Termination  Date shall be extended for a period of 364
     days from such existing date.

Each of the Co-Agents shall advise Borrower and the Administrative Agent in
writing whether each request made pursuant to clause (a) or clause (b) above has
been granted within 30 days after such request has been made and whether such
consent is subject to satisfaction of any


                                       31
<PAGE>

conditions  precedent.  If any such request is not granted  within 30 days after
such request has been made by each of the Groups, the Liquidity Termination Date
or Scheduled  Commitment  Termination  Date,  as the case may be, for all Groups
shall  remain  unchanged.  If any such  request is granted by each of the Groups
within 30 days after such request has been made, the Liquidity  Termination Date
or Scheduled Commitment  Termination Date, as the case may be, shall be extended
as provided  in the  Administrative  Agent's  confirmatory  written  notice upon
satisfaction of any conditions precedent specified therein.

     Section  2.7  Voluntary  Termination  of  Committed  Lenders'  Commitments;
Reduction of Facility Limit. Borrower may, in its sole discretion for any reason
upon at  least  10  Business  Days'  prior  written  irrevocable  notice  to the
Co-Agents,  terminate the Committed  Lenders' several  Commitments in whole, or,
reduce the Facility Limit and the  Commitments in part;  provided,  however that
(a) each such partial reduction will be made ratably amongst the Groups and will
be in a minimum amount of $5,000,000 per Group or a higher integral  multiple of
$1,000,000,  (b) no such  partial  reduction  shall  reduce  any  Group's  Group
Percentage of the Facility Limit below $50,000,000, (c) any partial reduction of
the Facility Limit below the aggregate  Credit Exposure must be accompanied by a
prepayment  of the  Advances  and/or  a  pledge  of cash  collateral  for the LC
Obligations, in an aggregate amount sufficient to eliminate such difference, (d)
partial  reductions may occur only on Distribution  Dates, and (e) in connection
with any partial  reduction,  Borrower,  shall  comply with  Section  3.2(b) and
Section 4.1(b).

Section 2.8 Notes. All Loans from the Lenders in a Group shall be evidenced by a
single promissory grid note (each, as amended, modified, extended or replaced
from time to time, a "Lender Note") substantially in the form set forth in
Exhibit B, with appropriate insertions, payable to the order of the applicable
Co-Agent. Borrower hereby irrevocably authorizes each Co-Agent in connection
with its Group's Lender Note to make (or cause to be made) appropriate notations
on the grid attached to such Lender Note (or on any continuation of such grid,
or, in lieu of making notations on such grid or any continuation thereof, at
such Co-Agent's option, in its records), which notations, if made, shall
evidence, inter alia, the date of, the outstanding principal of, and the
interest rate and Interest Period applicable to the Loans evidenced thereby.
Such notations shall be rebuttably presumptive evidence of the subject matter
thereof, absent manifest error; provided, however, that the failure to make any
such notations shall not limit or otherwise affect any Obligations of Borrower.

                                  ARTICLE III.
                              INTEREST, FEES, ETC.

     Section 3.1 Interest Rates. Borrower hereby promises to pay interest on the
unpaid principal amount of each Loan for the period  commencing on the date such
Loan is made  until  such  Loan is paid in full  (or,  in the case of a CP Loan,
refinanced with an Alternative Rate Loan), as follows:

          (a) during each Interest Period applicable to a CP Loan, at a rate per
     annum equal to the sum of (i) the applicable  Conduit  Lender's  Commercial
     Paper Rate  applicable to such Interest  Period,  plus (ii) the  Applicable
     Margin;

                                       32
<PAGE>

          (b) during each  Interest  Period  applicable to an  Alternative  Rate
     Loan, at a rate per annum equal to the Alternative  Rate applicable to such
     Interest Period; and

          (c)  notwithstanding  the provisions of the preceding  clauses (a) and
     (b), in the event that a Significant  Event has occurred and is continuing,
     at a rate per annum equal to the Default Rate. After the date any principal
     amount of any Loan is due and payable (whether on the Scheduled  Commitment
     Termination  Date,  upon  acceleration  or  otherwise)  or after  any other
     monetary  Obligation of Borrower  arising under this Agreement shall become
     due and payable,  Borrower shall pay (to the extent permitted by law, if in
     respect of any unpaid amounts  representing  interest)  interest  (after as
     well as before  judgment)  on such amounts at a rate per annum equal to the
     Default Rate.

No provision of this  Agreement or any Lender Note shall  require the payment or
permit  the  collection  of  interest  in excess  of the  maximum  permitted  by
applicable law.

     Section 3.2 Interest Payment Dates.  Interest accrued on each Loan shall be
payable, without duplication:

          (a) on each  Distribution  Date  prior to the  Commitment  Termination
     Date,  for the period  since the  creation of such Loan (in the case of the
     first  Distribution  Date thereafter) or since the prior  Distribution Date
     (in the case of any subsequent Distribution Date);

          (b) on the date of any payment or prepayment  (in whole or in part) of
     principal outstanding in such Loan, on the amount paid or prepaid (it being
     understood  that any  prepayment  shall be accompanied by any amounts owing
     under Section 6.2);

          (c) in full, on the Scheduled Commitment  Termination Date (whether at
     scheduled maturity or upon acceleration  thereof pursuant to Section 10.3);
     and

          (d) from and after the Commitment Termination Date, upon demand.

     Section 3.3  Applicable  Interest  Rates.  Each Co-Agent shall from time to
time advise Borrower and Servicer  whether a Loan is a CP Loan or an Alternative
Rate Loan, and of the interest rate applicable to each Interest Period thereof.

     Section 3.4 Fees. Borrower agrees to pay the Agents and the Lenders certain
Fees in the amounts and on the dates set forth in the Fee Letters.

     Section  3.5  Computation  of Interest  and Fees.  All  interest,  Fees and
Servicing  Fees  shall be  computed  on the basis of the  actual  number of days
(including the first day but excluding the last day) occurring during the period
for which such  interest,  Fee or Servicing Fee is payable over a year comprised
of 360 days.  Each Co-Agent  shall provide  Borrower with an invoice for accrued
and  unpaid  interest  and fees due to such  Co-Agent,  for the  benefit of such


                                       33

<PAGE>

Co-Agent's  Group, on each Distribution Date not later than the 5th Business Day
prior to such Distribution Date.

                                   ARTICLE IV.
             REPAYMENTS AND PREPAYMENTS; DISTRIBUTION OF COLLECTIONS

     Section 4.1 Repayments and Prepayments. On the Commitment Termination Date,
Borrower  shall repay in full the unpaid  principal  amount of the  Advances and
Cash-Collateralize the LC Obligations in full. Prior thereto, Borrower:

          (a) may, from time to time on any Business Day, make a prepayment,  in
     whole or in part,  of the  outstanding  principal  amount of the  Advances,
     ratably amongst the Groups;  provided,  however, that, (i) unless otherwise
     consented to by each of the Co-Agents, all such voluntary prepayments shall
     require at least two (2)  Business  Days' (or,  in the case of a  voluntary
     prepayment  of  $10,000,000  or more per Group,  at least ten (10) Business
     Days') prior written  notice to the  Co-Agents,  and (ii) unless  otherwise
     consented to by the Co-Agents, all such voluntary partial prepayments shall
     be in a  minimum  amount  of  $5,000,000  per  Group or a  larger  integral
     multiple of $500,000 per Group if in excess thereof;

          (b)  shall,  on each date when any  reduction  in the  Facility  Limit
     becomes  effective  pursuant  to  Section  2.6,  make a  prepayment  of the
     Advances  ratably  amongst  the  Groups  and/or  Cash-Collateralize  the LC
     Obligations,  in an aggregate  amount  equal to the excess,  if any, of the
     Credit Exposure over the Facility Limit as so reduced;

          (c)  shall,   immediately  upon  any  acceleration  of  the  Scheduled
     Commitment  Termination  Date pursuant to Section 10.3,  repay all Advances
     and  Cash-Collateralize  the LC  Obligations,  unless,  pursuant to Section
     10.3.1,  only a portion of the Credit Exposure is so accelerated,  in which
     event Borrower shall repay the accelerated portion of the Advances, ratably
     amongst the Groups and Cash-Collateralize the accelerated portion of the LC
     Obligations; and

          (d) shall, not later than the next  Distribution Date and in any event
     within  two (2)  Business  Days after  discovering  that a  Borrowing  Base
     Deficit  exists,  make a prepayment  of the Advances,  ratably  amongst the
     Groups,  and/or  Cash-Collateralize  the LC  Obligations,  in an  aggregate
     amount  equal to such  Borrowing  Base  Deficit.  Each such  prepayment  of
     Advances shall be subject to the payment of any amounts required by Section
     6.2.

     Section 4.2 Application of Collections.

          (a) All Collections shall be distributed by the Servicer at such times
and in the order of priority  set forth in this Section 4.2 and shall be paid to
the Co-Agents for distribution to the members of each of their respective Groups
in accordance with Section 4.3.

                                       34
<PAGE>

          (b) On each  Distribution  Date  prior to the  Commitment  Termination
Date, the Servicer shall distribute from Collections received by Borrower or the
Servicer  prior  to such  Distribution  Date,  the  following  amounts,  without
duplication, in the following order of priority:

          first,  to the  Servicer,  to the  extent  due and  owing  under  this
     Agreement or any other  Transaction  Document,  the accrued  Servicing  Fee
     payable for the prior Calculation  Period (plus, if applicable,  the amount
     of  Servicing  Fee payable for any prior  Calculation  Period to the extent
     such amount has not been distributed to Servicer);

          second,  to the  Co-Agents  for  distribution  to the Lenders in their
     respective  Groups,  interest accrued on the Loans made by their respective
     Groups  during the period  from the most  recent  Distribution  Date to the
     current  Distribution Date (plus, if applicable,  the amount of interest on
     the Loans made by their  respective  Groups accrued for any prior period to
     the extent such amount has not been paid,  and to the extent  permitted  by
     law, interest thereon);

          third,  to the  Co-Agents  for  distribution  to the  members of their
     respective  Groups,  to the  extent  due and owing  under  any  Transaction
     Document,  all Fees accrued during the prior  Calculation  Period (plus, if
     applicable,  the amount of Fees accrued for any prior Calculation Period to
     the extent such amount has not been distributed to the Co-Agents);

          fourth,  to the  Co-Agents  for  distribution  to the Lenders in their
     respective  Groups,  as a repayment of principal of the  Advances,  ratably
     amongst  the  Groups,  an  aggregate  amount  equal to the  Borrowing  Base
     Deficit, if any;

          fifth,  to the  Co-Agents  for  distribution  to the  members of their
     respective  Groups, to the extent due and owing under this Agreement or any
     other Transaction Document on such Distribution Date, all other Obligations
     owed to any Secured Party; and

          sixth, the balance, if any, to Borrower.

          (c) On each Distribution  Date on or after the Commitment  Termination
Date, the Servicer shall distribute from Collections received by Borrower or the
Servicer  prior  to such  Distribution  Date,  the  following  amounts,  without
duplication, in the following order of priority:

          first,  to the  Servicer,  to the  extent  due and  owing  under  this
     Agreement or any other  Transaction  Document,  the accrued  Servicing  Fee
     payable for the prior Calculation  Period (plus, if applicable,  the amount
     of  Servicing  Fee payable for any prior  Calculation  Period to the extent
     such amount has not been distributed to Servicer);

          second,  to  the  Co-Agents  for  distribution  to  members  of  their
     respective Groups, all Obligations other than LC Obligations and other than
     principal due and owing on the Advances on such Distribution Date;

                                     35
<PAGE>

          third,  ratably to the  Co-Agents for  distribution  to the members of
     their respective  Groups,  as a repayment of Reimbursement  Obligations and
     principal of the Advances; and

          fourth,  to the LC Issuers,  ratably in accordance  with the Aggregate
     Face  Amount  Outstanding  of the  Letters  of Credit  issued  by them,  to
     Cash-Collateralize the LC Obligations; and

          fifth, once all amounts described in clauses first,  second, third and
     fourth above have been paid in full, the balance, if any, to Borrower.

     Section 4.3 Application of Certain  Payments.  Each payment of principal of
the Advances  shall be made  ratably  amongst the Groups and shall be applied to
such Loans made by the members of each Group as Servicer shall direct or, in the
absence of such notice or during the existence of a  Significant  Event or after
the Commitment  Termination Date, as the applicable  Co-Agent shall determine in
its discretion. All payments of interest, Fees and other Obligations (other than
principal)  shall be made ratably  amongst the Groups in  accordance  with their
respective pro rata shares thereof.

     Section 4.4 Due Date  Extension.  If any payment of  principal  or interest
with respect to any Advance or Reimbursement Obligation falls due on a day which
is not a  Business  Day,  then  such due  date  shall  be  extended  to the next
following  Business Day, and additional  interest shall accrue at the applicable
interest rate and be payable for the period of such extension.

     Section 4.5 Timing of Payments.  All payments of principal  of, or interest
on, the Advances and of all Fees, and all amounts to be deposited by Borrower or
Servicer  hereunder,  shall be made by Borrower or Servicer,  as applicable,  no
later than 12:00 noon (New York City time),  on the day when due in lawful money
of the United States of America in immediately available funds to the Co-Agents.
Funds  received  by the  Co-Agents  after 12:00 noon (New York City time) on the
date  when  due,  will be  deemed  to have  been  received  by them on the  next
following Business Day.

     Section 4.6 Release of Excess Cash Collateral.  If on any Distribution Date
prior to the Commitment  Termination  Date, the balances in the Letter of Credit
Collateral  Accounts  exceed the amount  required  by this  Agreement,  unless a
Significant Event or Potential  Significant Event shall exist and be continuing,
the LC Issuers shall release the excess cash collateral to Borrower.

     Section 4.7 Payments Rescission. No payment of any of the Obligations shall
be considered paid or applied  hereunder to the extent that, at any time, all or
any portion of such payment or application is rescinded by application of law or
judicial  authority,  or must  otherwise be returned or refunded for any reason.
Borrower shall remain  obligated for the amount of any payment or application so
rescinded,  returned or  refunded,  and shall  promptly  pay to each  applicable
Co-Agent (for application to the Person or Persons who suffered such rescission,
return or refund) or the applicable LC Issuer,  as  applicable,  the full amount
thereof, plus, if such


                                       36
<PAGE>

amount  represented  a refund of  principal,  interest,  fees or  otherwise,  as
applicable, with respect thereto from the date of any such rescission, return or
refunding.

                                   ARTICLE V.
                                SECURITY INTEREST

     Section 5.1 Grant of Security.

          (a) Borrower  hereby assigns and pledges to the  Administrative  Agent
(for  the  benefit  of  the  Secured   Parties),   and  hereby   grants  to  the
Administrative  Agent  (for the  benefit  of the  Secured  Parties)  a  security
interest in all of Borrower's right, title and interest in and to the following,
whether now or hereafter existing and wherever located (the "Collateral"):

          (i) all Receivables, Related Security and Receivable Files;

          (ii) all of  Borrower's  rights,  remedies,  powers and  privileges in
     respect of the Receivables Sale Agreement,  including,  without limitation,
     its  rights to  receive  Purchase  Price  Credits  and  indemnity  payments
     thereunder;

          (iii) all of Borrower's  rights,  remedies,  powers and  privileges in
     respect of the Performance Undertaking,  including, without limitation, its
     right to demand performance thereunder;

          (iv) the LockBox Accounts and all funds on deposit  therein,  together
     with all certificates and instruments, if any, from time to time evidencing
     such accounts and funds on deposit; and

          (v)  all  products  and  proceeds   (including,   without  limitation,
     insurance proceeds) of, and additions,  improvements and accessions to, and
     books and records describing or used in connection with, all and any of the
     property described above.

          (b) This grant of security  secures the payment and performance of all
Obligations.

          (c) This grant of security shall create a continuing security interest
in the Collateral and shall:

          (i) remain in full force and effect until the  Administrative  Agent's
     (for the benefit of the Secured  Parties)  interest in the Collateral shall
     have been released in accordance with Section 5.4;

          (ii)  be  binding  upon  Borrower,  its  successors,  transferees  and
     assigns; and

          (iii)   inure,   together   with  the  rights  and   remedies  of  the
     Administrative Agent (for the benefit of the Secured Parties) hereunder, to
     the benefit of the  Administrative  Agent and each Secured  Party and their
     respective successors, transferees and assigns.

                                       37
<PAGE>


     Section  5.2  Administrative  Agent  Appointed  Attorney-in-Fact.  Borrower
hereby  irrevocably  appoints the  Administrative  Agent (for the benefit of the
Secured  Parties) as  Borrower's  attorney-in-fact,  with full  authority in the
place and stead of Borrower and in the name of Borrower or otherwise,  from time
to time in the  Administrative  Agent's  discretion,  after the  occurrence  and
during the continuation of a Significant Event to take any action and to execute
any instrument which the Administrative Agent may deem necessary or advisable to
accomplish  the  purposes  of  the  Transaction  Documents,  including,  without
limitation:

          (a) to ask, demand, collect, sue for, recover, compromise, receive and
     give  acquittance and receipts for moneys due and to become due under or in
     respect of any of the Collateral;

          (b) to receive,  endorse, and collect any drafts or other instruments,
     documents and chattel paper, in connection with clause (a) above;

          (c) to file any claims or take any action or institute any proceedings
     which the  Administrative  Agent may deem  necessary or  desirable  for the
     collection  of any of the  Collateral or otherwise to enforce the rights of
     the  Administrative  Agent (for the  benefit of the Secured  Parties)  with
     respect to any of the Collateral;

          (d) to  sell,  transfer,  assign  or  otherwise  deal in or  with  the
     Collateral  or any  part  thereof  pursuant  to the  terms  and  conditions
     hereunder; and

          (e) to perform  the  affirmative  obligations  of  Borrower  under the
     Transaction  Documents.  The Administrative  Agent agrees to give Borrower,
     Servicer and the Co-Agents  prior written  notice of the taking of any such
     action,  but the failure to give such  notice  shall not affect the rights,
     power or  authority  of the  Administrative  Agent  with  respect  thereto.
     Borrower  hereby  acknowledges,  consents  and  agrees  that  the  power of
     attorney  granted  pursuant to this Section 5.2 is irrevocable  and coupled
     with an interest.

     Section 5.3 Administrative  Agent May Perform. If Borrower fails to perform
any agreement contained herein, the Administrative Agent (for the benefit of the
Secured Parties) may itself perform, or cause performance of such agreement, and
the expenses of the Administrative  Agent incurred in connection therewith shall
be payable by Borrower.

     Section 5.4 Release of  Collateral.  The  Administrative  Agent's  (for the
benefit of the Secured  Parties)  right,  title and  interest in the  Collateral
shall  be  released  effective  on  the  date  occurring  after  the  Commitment
Termination Date on which all Obligations shall have been finally and fully paid
and performed.

                                       38
<PAGE>

                                  ARTICLE VI.
                              INCREASED COSTS, ETC.

     Section 6.1 Increased  Costs. If any change in Regulation D of the Board of
Governors of the Federal Reserve System, or any Regulatory  Change, in each case
occurring after the date hereof:

          (a) shall subject any Affected  Party to any tax, duty or other charge
     with respect to any Loan made or funded by it, or shall change the basis of
     taxation of payments to such Affected Party of the principal of or interest
     on any Loan owed to or funded by it or any  other  amounts  due under  this
     Agreement in respect of any Loan made or funded by it (other than  Excluded
     Taxes); or

          (b) shall impose,  modify or deem  applicable any reserve  (including,
     without  limitation,  any reserve  imposed by the Board of Governors of the
     Federal  Reserve  System,   but  excluding  any  reserve  included  in  the
     determination  of interest rates pursuant to Section 3.1),  special deposit
     or similar  requirement against assets of, deposits with or for the account
     of, or credit extended by, any Affected Party; or

          (c) shall  change the  amount of capital  maintained  or  required  or
     requested or directed to be  maintained by any Affected  Party  (including,
     without  limitation,  because  the assets and  liabilities  of any  Conduit
     Lender are  required to be  consolidated  with those of any other  Affected
     Party under applicable accounting principles); or

          (d) shall impose on any Affected Party any other  condition  affecting
     any Loan made or funded, or Letter of Credit issued, by any Affected Party;

and the  result of any of the  foregoing  is to (i)  increase  the cost to or to
impose a cost on (A) an Affected Party issuing,  funding,  making or maintaining
any Letter of Credit or Loan (including extensions of credit under any Liquidity
Agreement or any other applicable Support  Agreement,  or any commitment of such
Affected  Party with respect to any of the  foregoing),  or (B) any Co-Agent for
continuing its or Borrower's  relationship with a Conduit Lender, (ii) to reduce
the amount of any sum  received or  receivable  by an Affected  Party under this
Agreement,  the applicable  Lender Note, the applicable  Liquidity  Agreement or
other applicable  Support  Agreement with respect thereto,  or (iii) in the good
faith  determination of such Affected Party, to reduce the rate of return on the
capital of an Affected Party as a consequence of its obligations  hereunder,  or
under the applicable  Liquidity Agreement or other applicable Support Agreement,
as applicable,  or arising in connection  herewith or therewith to a level below
that which such Affected Party could otherwise have achieved,  then after demand
by such  Affected  Party to Borrower  (which  demand shall be  accompanied  by a
written  statement  setting forth the basis of such demand),  Borrower shall pay
such Affected Party such additional amount or amounts as will (in the reasonable
determination  of such Affected  Party)  compensate such Affected Party for such
increased cost or such reduction.  Such written  statement  (which shall include
calculations  in reasonable  detail) shall, in the absence of manifest error, be
conclusive evidence of the subject matter thereof.

                                       39
<PAGE>

     If the assets and  liabilities  of any  Conduit  Lender are  required to be
consolidated with those of any other Affected Party under applicable  accounting
principles  or the  capitalization  of such  Conduit  Lender is  required  to be
increased in order to avoid such consolidation  (either of the foregoing Conduit
Lenders, an "Impacted Conduit") and such Impacted Conduit's Co-Agent administers
another  multi-seller  commercial  paper  conduit which is not required to be so
consolidated  or  re-capitalized,  such Co-Agent and such Impacted  Conduit will
make all  reasonable  efforts to  promptly  substitute  such other  multi-seller
commercial paper conduit for the Impacted Conduit under this Agreement, and each
of the other  parties  hereto  hereby  agrees to  execute  such  amendments  and
consents as may be reasonably necessary to give effect to such substitution.  If
there is only one Impacted Conduit, Borrower shall have the right to require the
members of the Group including such Impacted  Conduit to assign their respective
positions to another  multi-seller  commercial paper conduit that will not be an
Impacted Conduit and its liquidity  providers,  and such Impacted Conduit agrees
to enter into such  assignment.  Lastly,  in the event  that any of the  Conduit
Lenders becomes an Impacted  Conduit,  each of the Conduit Lenders hereby agrees
that in no event will the additional amounts payable under this Section 6.1 as a
result of such event cause the aggregate  amount of interest and Fees that would
be payable to such  Impacted  Conduit to exceed the amount of interest  and Fees
that would have been payable if such Impacted Conduit's Loans had been funded by
its Committed Lender at an Alternative Rate.

     Section 6.2 Broken Funding Costs.  Borrower  hereby agrees that upon demand
by any Affected Party (which demand shall be accompanied by a written  statement
setting forth in reasonable  detail the basis for the calculations of the amount
being  claimed),  Borrower will indemnify such Affected Party against any Broken
Funding Costs.  Such written  statement shall, in the absence of manifest error,
be conclusive evidence of the subject matter thereof.

     Section 6.3 Withholding Taxes.

          (a) All payments made by Borrower hereunder (or by Servicer, on behalf
of Borrower,  hereunder) shall be made free and clear of, and without  reduction
or withholding for or on account of, any present or future Covered Taxes, now or
hereafter imposed, levied,  collected,  withheld or assessed by any Governmental
Authority or other  taxing  authority.  If any Covered  Taxes are required to be
withheld from any amounts  payable to any of the Agents,  LC Issuers or Lenders,
the amounts so payable to such Agent,  LC Issuer or Lender shall be increased to
the extent  necessary to yield to such Agent, LC Issuer or Lender (after payment
of all such Covered Taxes) all such amounts payable hereunder at the rates or in
the  amounts  specified  herein.  Whenever  any  Covered  Taxes are  payable  by
Borrower,  as  promptly  as  possible  thereafter,  Borrower  shall  send to the
applicable  Agent, LC Issuer or Lender a certified copy of an original  official
receipt received by Borrower  showing payment thereof.  If Borrower fails to pay
any Covered Taxes when due to the appropriate taxing authority or fails to remit
to the applicable Agent, LC Issuer or Lender the required documentary  evidence,
Borrower shall indemnify such Agent, LC Issuer and Lender for such Covered Taxes
and any  incremental  taxes that may become payable by such Agent,  LC Issuer or
Lender as a result of any such failure.

          (b) At least five (5)  Business  Days prior to the first date on which
any payments,  including discount or Fees, are payable hereunder for the account
of any LC Issuer  or  Lender,  if an LC  Issuer or a Lender is not  incorporated
under the laws of the United States,  such

                                       40

<PAGE>

   LC Issuer or Lender agrees to deliver to each of Borrower, the applicable
Co-Agent  and the  Administrative  Agent  two (2) duly  completed  copies of (i)
United  States  Internal  Revenue  Service  Form W-8BEN or W-8ECI (or  successor
applicable  form),  or other forms or  certifications  reasonably  requested  by
Borrower,   applicable  Co-Agent  or  Administrative   Agent,  pursuant  to  the
regulations   promulgated   under   Section  1441  of  the  Code  or  other  IRS
publications,  certifying  that such LC Issuer or Lender is  entitled to receive
payments hereunder without deduction or withholding of any United States federal
income taxes or (ii) United States Internal  Revenue Service Form W-8 or W-9 (or
successor  applicable  form) to establish an exemption from United States backup
withholding  tax.  Each  applicable  LC Issuer or Lender shall replace or update
such forms as is necessary or appropriate  to maintain any applicable  exemption
or as is requested by any Agent or Borrower. If any LC Issuer or Lender does not
deliver the forms  described  in this  Section  6.3(b),  Borrower  shall have no
obligations  under Section  6.3(a) with respect to United States  federal income
taxes on such  payment,  and  Borrower or the  applicable  Agent shall  withhold
United  States  federal  income  taxes from any payments  made  hereunder at the
statutory rate  applicable to payments made to LC Issuer or Lender.  Each Lender
and LC Issuer agrees to indemnify and hold Borrower and the Agents  harmless for
any United States federal income taxes, penalties,  interest and other costs and
losses  incurred  or  payable  by  Borrower  or any of the Agents as a result of
either (x) such  Lender's or LC Issuer's  failure to submit any form required to
be provided  pursuant to this Section  6.3(b) or (y)  Borrower's or such Agent's
reliance on any form that such Lender or LC Issuer has provided pursuant to this
Section 6.3(b).

                                  ARTICLE VII.
                             CONDITIONS TO BORROWING

     Section 7.1 Initial Loan.  The making of the initial  Advance  hereunder is
subject to the  conditions  precedent that the  Administrative  Agent shall have
received  all of the  following,  each duly  executed and dated the date of such
Advance (or such earlier  date as shall be  satisfactory  to the  Administrative
Agent), in form and substance satisfactory to the Agents:

          7.1.1  Resolutions.  Certified  copies of  resolutions of the Board of
     Directors of Borrower,  the  Performance  Guarantor and each of the Sellers
     authorizing   or  ratifying  the  execution,   delivery  and   performance,
     respectively, of the Transaction Documents to which it is a party, together
     with a certified copy of its Organizational Documents.

          7.1.2 Consents,  etc. Certified copies of all documents evidencing any
     necessary consents and governmental  approvals (if any) with respect to the
     Transaction Documents.

          7.1.3 Incumbency and Signatures.  A certificate of the Secretary or an
     Assistant Secretary of Borrower,  Servicer,  the Performance  Guarantor and
     each Seller  certifying the names of its officer or officers  authorized to
     sign the Transaction Documents to which it is a party.

          7.1.4 Good  Standing  Certificates.  Good  standing  certificates  for
     Borrower,  Servicer, the Performance Guarantor and each Seller issued as of
     a


                                       41
<PAGE>

     recent date acceptable to the Administrative  Agent by (a) the Secretary of
     State  of the  jurisdiction  of  such  Person's  organization,  and (b) the
     Secretary of State of the jurisdiction  where such Person's chief executive
     office and principal place of business are located.

          7.1.5 Financing  Statements.  (i) Proper  financing  statements  (Form
     UCC-1),   filed   on  or  prior   to  the   date  of  the   initial   Loan,
      naming Borrower as debtor and the Administrative Agent
     (for the  benefit of the Secured  Parties)  as the secured  party as may be
     necessary or, in the opinion of the Administrative  Agent,  desirable under
     the UCC to  perfect  the  Administrative  Agent's  (for the  benefit of the
     Secured Parties) security interest in the Collateral, (ii) proper financing
     statements,  filed on or prior to the date of the initial  Advance,  naming
     each Seller, as seller/debtor,  Borrower as purchaser/secured party and the
     Administrative  Agent as assignee as may be necessary or, in the opinion of
     the  Administrative  Agent,  desirable under the UCC to perfect  Borrower's
     ownership  interest  in the  Receivables,  and (iii)  authorized  copies of
     proper Uniform Commercial Code Form UCC-3 termination  statements,  if any,
     necessary  to release all liens and other  Adverse  Claims of any Person in
     the Collateral granted by Borrower or any Seller.

               7.1.6 Search  Reports.  A written  search report  provided to the
          Administrative   Agent  by  a  search   service   acceptable   to  the
          Administrative  Agent listing all effective financing  statements that
          name  Borrower or any Seller as debtor or assignor  and that are filed
          in the  jurisdictions  in which  filings were made pursuant to Section
          7.1.5 above and in such other  jurisdictions  that the  Administrative
          Agent shall reasonably request, together with copies of such financing
          statements  (none of which shall  cover any  Collateral  or  interests
          therein or proceeds of any thereof),  and tax and judgment lien search
          reports from a Person satisfactory to the Administrative Agent showing
          no evidence of such lien filed against Borrower or any Seller.

               7.1.7 Fee Letters;  Payment of Fees.  The Fee  Letters,  together
          with  all  outstanding  Fees  payable  pursuant  to the  Fee  Letters.

               7.1.8 Receivables Sale Agreement. (i) Duly executed and delivered
          counterparts  of  each  of the  Receivables  Sale  Agreement  and  all
          documents,  agreements and instruments  contemplated thereby, and (ii)
          evidence  that each of the  conditions  precedent to the execution and
          delivery of the  Receivables  Sale Agreement has been satisfied to the
          Agents'  satisfaction,  and that the initial assignments and transfers
          under the Receivables Sale Agreement have been consummated.

               7.1.9  Opinions  of  Counsel.  Opinions  of counsel to  Borrower,
          Servicer,  the  Performance  Guarantor  and  each  Seller  in form and
          substance satisfactory to the Agents.

                                       42
<PAGE>
               7.1.10 Lender Notes.  Each of the Lender Notes,  duly executed
          by Borrower in favor of a Co-Agent.


               7.1.11 Borrowing Base Certificate.  A Borrowing Base Certificate,
          duly  executed  by an  authorized  Senior  Executive  of  Servicer  on
          Borrower's  behalf  showing a calculation  of the Borrowing Base as of
          November 30, 2002.

               7.1.12 Lock Box Account Agreements.  The Lock Box Agreements with
          respect to each of the  LockBox  Accounts in the United  States,  duly
          executed  by  all of  the  parties  thereto,  and a  letter  agreement
          regarding  post-closing  documentation  of a  charge  on  the  LockBox
          Account at Wachovia Bank, National Association, in London, England.

               7.1.13  Releases.   Releases  and  termination   statements  duly
          executed by each Person, other than Borrower,  that has an interest in
          the Receivables.

               7.1.14 Performance Undertaking. The Performance Undertaking, duly
          executed by the Performance Guarantor.


               7.1.15 Other. Such other documents,  certificates and opinions as
          any of the Agents may reasonably request.


     Section 7.2 All  Advances.  The making of each Advance,  including  without
limitation, the initial Advance, is subject to them conditions precedent that:

               7.2.1 No Default,  etc.  (i) No  Significant  Event or  Unmatured
          Significant  Event has occurred and is  continuing or will result from
          the making of such Advance, (ii) the representations and warranties of
          Borrower contained in Article VIII are true and correct as of the date
          of such requested Advance,  with the same effect as though made on the
          date of such  Advance,  and (iii) after giving effect to such Advance,
          the  aggregate  unpaid  balance  of the  Advances  will not exceed the
          Borrowing Base or the Facility Limit.  By making a Borrowing  Request,
          Borrower shall be deemed to have  represented and warranted that items
          (i), (ii) and (iii) in the preceding sentence are true and correct.

               7.2.2  Borrowing  Request,  etc. The Agents shall have received a
          Borrowing  Request for such  Advance in  accordance  with Section 2.2,
          together  with  all  items  required  to be  delivered  in  connection
          therewith.

               7.2.3  Commitment  Termination  Date. The Commitment  Termination
          Date shall not have occurred.

               7.2.4  Accounts.  Each of the  LockBox  Accounts  shall have been
          transferred  into  Borrower's  name . The  LockBox  Accounts  shall be
          subject to valid and perfected  first  priority  security  interest in
          favor of the  Administrative  Agent  for the  benefit  of the  Secured
          Parties.

                                       43
<PAGE>


                                 ARTICLE VIII.
                         REPRESENTATIONS AND WARRANTIES

     In order to induce the Lenders, the LC Issuers and the Agents to enter into
this Agreement and, in the case of a Lender or LC Issuer, to make Loans or issue
Letters of Credit  hereunder,  Borrower  hereby  represents  and warrants to the
Agents,  the LC Issuers  and the  Lenders as to itself as  follows,  and Bowater
hereby represents and warrants to the Agents,  the LC Issuers and the Lenders as
to itself as follows:

     Section  8.1  Existence  and  Power.  Each of  Bowater  and  Borrower  is a
corporation  duly  organized  under  the laws of the State of  Delaware,  and is
validly  existing  and  in  good  standing  under  the  laws  of  its  state  of
organization  and is duly  qualified to do business and is in good standing as a
foreign corporation,  and has and holds all power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction  in which its business is conducted  except where the failure to so
qualify or so hold could not  reasonably be expected to have a Material  Adverse
Effect.

     Section 8.2 Power and Authority; Due Authorization, Execution and Delivery.
The execution and delivery by each of Bowater and Borrower of this Agreement and
each other  Transaction  Document to which it is a party, and the performance of
its obligations hereunder and thereunder,  and Borrower's use of the proceeds of
the Loans made hereunder, are within its powers and authority and have been duly
authorized by all necessary  corporate  action on its part.  This  Agreement and
each other Transaction Document to which Bowater or Borrower is a party has been
duly executed and delivered by Bowater or Borrower, as the case may be.

     Section 8.3 No Conflict. The execution and delivery by each of Borrower and
Bowater of this Agreement and each other  Transaction  Document to which it is a
party,  and the performance of its  obligations  hereunder and thereunder do not
contravene or violate (i) its  Organizational  Documents,  (ii) any law, rule or
regulation  applicable  to it,  (iii)  any  restrictions  under  any  agreement,
contract  or  instrument  to  which  it is a party  or by which it or any of its
property is bound,  or (iv) any order,  writ,  judgment,  award,  injunction  or
decree  binding on or  affecting  it or its  property,  and do not result in the
creation or  imposition  of any Adverse  Claim on its assets  (except as created
under the  Transaction  Documents)  except,  in any case set forth in (i) - (iv)
above, where such contravention or violation could not reasonably be expected to
have a Material  Adverse  Effect.  No transaction  contemplated  hereby requires
compliance with any bulk sales act or similar law.

     Section  8.4  Governmental  Authorization.  Other  than the  filing  of the
financing  statements required hereunder,  no authorization or approval or other
action  by,  and no notice to or filing  with,  any  governmental  authority  or
regulatory  body is required  for the due  execution  and delivery by Bowater or
Borrower of this Agreement and each other Transaction  Document to which it is a
party and the performance of its obligations hereunder and thereunder.

     Section  8.5  Actions,   Suits.   There  is  no  litigation,   arbitration,
governmental  investigation,  proceeding or inquiry pending or, to the knowledge
of any of Bowater's  or  Borrower's  Senior  Executives,  threatened  against or
affecting  Bowater or any of its  Subsidiaries

                                       44
<PAGE>

that, if adversely  determined,  could reasonably be expected to have a Material
Adverse  Effect  or which  seeks to  prevent,  enjoin  or delay  the  making  or
repayment of any Loans.

     Section 8.6  Binding  Effect.  This  Agreement  and each other  Transaction
Document to which Bowater or Borrower is a party constitute the legal, valid and
binding  obligations  of Bowater or  Borrower,  as the case may be,  enforceable
against it in accordance with their respective terms, except as such enforcement
may be limited by applicable  bankruptcy,  insolvency,  reorganization  or other
similar laws relating to or limiting  creditors' rights generally and by general
principles  of  equity  (regardless  of  whether  enforcement  is  sought  in  a
proceeding in equity or at law).

     Section  8.7  Accuracy  of   Information.   All  written   representations,
warranties,  reports or certificates of any of its Senior Executives  heretofore
furnished  by Bowater or Borrower  for  purposes of or in  connection  with this
Agreement,   any  of  the  other   Transaction   Documents  or  any  transaction
contemplated  hereby  or  thereby  are,  and all such  written  representations,
warranties,  reports or certificates  hereafter furnished by Bowater or Borrower
shall be,  complete  and correct and fairly  present the  information  contained
therein as of the date such  information  is  certified  and do not and will not
contain  any  material  misstatement  of fact as of such date or omit to state a
material fact or any fact necessary to make the  information  contained  therein
taken as a whole  with all other  verbal and  written  information  provided  by
Senior Executives as of such date, not misleading. To the best of its knowledge,
all verbal information  heretofore  furnished by any Senior Executive of Bowater
or Borrower for purposes of or in  connection  with this  Agreement,  any of the
other Transaction  Documents or any transaction  contemplated  hereby or thereby
was, and all such verbal information  hereafter furnished by Bowater or Borrower
shall be, complete and correct as of the date such  information is furnished and
does not and will not contain any material  misstatement of fact as of such date
or omit to state a material fact or any fact necessary to make such  information
taken as a whole  with all other  verbal and  written  information  provided  by
Senior Executives as of such date, not misleading.

Section 8.8 Margin Regulations; Use of Proceeds. Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loans, directly or indirectly, will be used for a
purpose that violates, or would be inconsistent with, Regulations T, U and X
promulgated by the Federal Reserve Board from time to time. No portion of the
proceeds of any Loan hereunder will be used for a purpose that violates, or
would be inconsistent with, any other law, rule or regulation applicable to
Borrower.

     Section  8.9 Good  Title.  Borrower,  upon each  Transfer  pursuant  to the
Receivables Sale Agreement, is the legal and beneficial owner of the Receivables
and the  Related  Security  with  respect  thereto,  or  possesses  a valid  and
perfected security interest therein, in each case, free and clear of any Adverse
Claim,  except as created  by the  Transaction  Documents.  There have been duly
filed  all  financing  statements  or other  similar  instruments  or  documents
necessary under the UCC of all appropriate  jurisdictions to perfect  Borrower's
ownership  interest in each such  Receivable,  its  Collections  and the Related
Security.

     Section  8.10  Perfection.  This  Agreement  is effective to create a valid
security  interest in the Collateral in favor of the  Administrative  Agent, for
the benefit of the  Secured


                                       45
<PAGE>

Parties.  There have been duly filed all  financing  statements or other similar
instruments or documents  necessary under the UCC (or any comparable law) of all
appropriate   jurisdictions  to  perfect  the  Administrative  Agent's  security
interest,  for the  benefit  of the  Secured  Parties,  in the  Collateral.  The
Collateral is free of any Adverse Claim except as created under the  Transaction
Documents.

     Section 8.11 Places of Business and  Locations  of Records.  The  principal
place of business and chief executive office of each of Borrower and Servicer is
located at its address  referred to on Schedule  15.3 to this  Agreement  (or at
such other  locations,  notified to the  Administrative  Agent in  jurisdictions
where  all  action  required  to  perfect  or  maintain  the  perfection  of the
Administrative   Agent's  security  interest  in  Collateral  has  been  taken).
Borrower's  Federal  Employer  Identification  Number  is  42-1560549,  and  its
Delaware organizational identification number is 3594632.

     Section 8.12 Accounts.  Borrower  represents and warrants that (a) Schedule
8.12 hereto is a complete and accurate  listing,  as of the Closing Date, of the
LockBoxes and LockBox  Accounts,  and (b) each of the LockBox  Accounts has been
established  in, or transferred  into,  Borrower's  name.  Neither  Servicer nor
Borrower  has  granted any  interest  in any  LockBox or LockBox  Account to any
Person other than the  Administrative  Agent, and the  Administrative  Agent has
exclusive  control of the LockBox  Accounts,  subject to the Servicer's right of
access  to such  accounts  as  provided  herein  and in the  applicable  LockBox
Agreements.

     Section 8.13 No Material Adverse Effect. There has been no Material Adverse
Effect  since the last day of its fiscal year as to which  financial  statements
have most recently been delivered pursuant to Section 9.1.5(a).

     Section 8.14 Names.  The name in which Borrower has executed this Agreement
is identical  to the name of Borrower as  indicated on the public  record of the
State of Delaware.  Borrower has not used any legal name,  trade name or assumed
name other than the name in which it has executed this Agreement.

     Section 8.15 Ownership of Borrower; No Subsidiaries.  All of the issued and
outstanding equity interests of Borrower are owned beneficially and of record by
BAI,  free and clear of any Adverse  Claim.  Such equity  interests  are validly
issued,  fully paid and  nonassessable,  and there are no  options,  warrants or
other rights to acquire securities of Borrower. Borrower has no Subsidiaries.

     Section  8.16 Not a  Holding  Company  or an  Investment  Company.  Neither
Borrower nor Servicer is a "holding  company" or a "subsidiary  holding company"
of a "holding  company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or any successor statute. Neither Borrower nor Servicer
is an "investment  company" within the meaning of the Investment  Company Act of
1940, as amended, or any successor statute.

     Section 8.17 Compliance with Credit and Collection Policy. Each of Borrower
and Bowater has complied in all material respects with the Credit and Collection
Policy with regard to each  Receivable and the related  Contract.  No change has
been made in or amendment to the Credit and Collection Policy, except (i) to the
extent such change or amendment would not

                                       46
<PAGE>

be reasonably  likely to materially and adversely affect the  collectibility  of
Receivables  or to materially  decrease the credit  quality of any newly created
Receivables or (ii) to the extent such change or amendment has been consented to
by Borrower and the Co-Agents.

     Section 8.18 Solvency. Both before and after giving effect to each Advance,
Borrower is Solvent.


     Section  8.19  Eligible  Receivables.   Each  Receivable  included  in  the
Borrowing  Base is an Eligible  Receivable  as of the date of (a) any  Borrowing
Base Certificate, and (b) any Monthly Report.

     Section  8.20 Sales by BAI.  Each sale of  Receivables  by BAI to  Borrower
shall  have been  effected  under,  and in  accordance  with the  terms of,  the
Receivables  Sale  Agreement,  including  the  payment by  Borrower to BAI of an
amount equal to the purchase price therefor as described in the Receivables Sale
Agreement,  and each such sale shall have been made for  "reasonably  equivalent
value" (as such term is used under ss. 548 of the  Bankruptcy  Code) and not for
or on  account of  "antecedent  debt" (as such term is used under ss. 547 of the
Bankruptcy Code) owed by Borrower to BAI.

                                  ARTICLE IX.
                       COVENANTS OF BORROWER AND SERVICER

     Section 9.1  Affirmative  Covenants.  From the date hereof  until the first
day,  following the Commitment  Termination Date, on which all Obligations shall
have been  finally and fully paid and  performed,  each of Borrower and Servicer
hereby  covenants and agrees with the Agents,  the LC Issuers and the Lenders as
to itself, as follows:

          9.1.1  Compliance  with Laws,  Etc. Each of Borrower and Servicer will
     comply  in  all  material   respects  with  all  applicable  laws,   rules,
     regulations and orders of all  governmental  authorities  (including  those
     which relate to the Receivables).

          9.1.2  Preservation of Legal Existence.  Each of Borrower and Servicer
     will preserve and maintain its existence, rights, franchises and privileges
     in the jurisdiction of its  organization,  and qualify and remain qualified
     in  good  standing  as a  foreign  entity  in the  jurisdiction  where  its
     principal place of business and its chief executive  office are located and
     in each other  jurisdiction where the failure to preserve and maintain such
     existence,  rights, franchises,  privileges and qualifications would have a
     Material Adverse Effect.

          9.1.3  Performance and Compliance with  Receivables.  Each of Borrower
     and Servicer will timely and fully perform and comply with all  provisions,
     covenants  and  other  promises  required  to be  observed  by it under the
     Receivables and all other agreements related to such Receivables.

          9.1.4 Credit and Collection Policy. Each of Borrower and Servicer will
     comply    in    all    material    respects    with    the    Credit    and
     Collection Policy.

                                       47
<PAGE>

          9.1.5  Reporting  Requirements.  Each of Borrower  and  Servicer  will
     furnish to the Co-Agents for distribution to the members of its Group:

                (a) Financial Statements.

          (i) within 140 days after the close of each of its fiscal years, (A) a
     copy of the unaudited  balance  sheet of Borrower,  in each case, as at the
     end of such year,  together with the related statement of earnings for such
     year, certified by the chief executive officer,  chief financial officer or
     controller of Borrower (which  certification  shall state that such balance
     sheet and statement or earnings fairly present the financial  condition and
     results of operations for such year in accordance  with GAAP except for the
     absence of footnotes),  and (B) a certificate of such officer  stating that
     such  officer  has  obtained  no  knowledge  that a  Significant  Event  or
     Unmatured  Significant Event has occurred and is continuing,  or if, in the
     opinion of such officer,  such a Significant Event or Unmatured Significant
     Event has occurred and is continuing, a statement as to the nature thereof;

          (ii) within 120 days after the close of each of its fiscal  years,  an
     audit report (with all amounts stated in Dollars),  which is unqualified as
     to scope and going  concern,  certified  by  independent  certified  public
     accountants  of  recognized  national  standing  or  otherwise   reasonably
     acceptable to the Administrative Agent, prepared in accordance with GAAP on
     a  consolidated  basis  for  Bowater  and  the  consolidated  Subsidiaries,
     including  a  consolidated  balance  sheet  and  the  related  consolidated
     statements  of  income,  cash  flows and  statements  of  changes in common
     shareholders'  equity,  setting forth in each case in comparative  form the
     figures for such fiscal year and the previous  fiscal year;  provided  that
     delivery of a copy of Bowater's  Forms 10-K filed with the  Securities  and
     Exchange  Commission for such fiscal year shall constitute  compliance with
     this requirement; and

          (iii)  within 60 days  after the  close of the first  three  quarterly
     periods of each of its  fiscal  years,  for  Bowater  and the  Consolidated
     Subsidiaries,  (A) an unaudited  consolidated balance sheet as at the close
     of each such period and a consolidated  income statement and a statement of
     cash flows for the period from the beginning of such fiscal year to the end
     of such quarter, setting forth in the case of such statements of income and
     cash flows in comparative  form the figures for the  corresponding  quarter
     and  the  corresponding  portion  of  Sellers  previous  fiscal  year,  all
     certified  (subject  to normal  year-end  adjustments)  as to  fairness  of
     presentation,  preparation  in accordance  with GAAP and  consistency  by a
     Financial Officer of Bowater; provided that delivery of a copy of Bowater's
     Forms 10-Q filed  with the  Securities  and  Exchange  Commission  for such
     fiscal quarter shall constitute compliance with this requirement, and (B) a
     certificate  of such  Financial  Officer of  Bowater to the effect  that no
     Significant  Event or  Unmatured  Significant  Event  has  occurred  and is
     continuing.

                                        48
<PAGE>

                (b) Monthly Reports and Borrowing Base Certificates.

          (i) On or before the second  Business Day preceding each  Distribution
     Date,  Servicer  shall  prepare  and deliver to each of the  Co-Agents  for
     distribution to the members of its Group a Monthly  Report,  as of the last
     day of the most recent Calculation  Period,  signed by an authorized Senior
     Executive of Servicer; and

          (ii) At any time while Bowater's  unsecured senior debt is Split-Rated
     (unless  Servicer  provides  such  Borrowing  Base  Certificate  weekly  as
     provided in clause (iii)  below,  which it may do at its  election),  on or
     before the 5th Business Day following the 15th day of each month hereafter,
     Servicer   shall   prepare  and  deliver  to  each  of  the  Co-Agents  for
     distribution  to the members of its Group, a Borrowing Base  Certificate as
     of the  most  recent  Calculation  Date,  signed  by an  authorized  Senior
     Executive of Servicer.

          (iii) At any time while Bowater's  unsecured senior debt is rated both
     "B+" or less by S&P and "B1" or less by  Moody's,  or  Servicer  elects  to
     provide  weekly  Borrowing  Base  Certificates  as  provided in clause (ii)
     above,  on or before  Wednesday of each week thereafter (or if any such day
     is not a Business Day, the next  succeeding  Business Day),  Servicer shall
     prepare  and  deliver  to each of the  Co-Agents  for  distribution  to the
     members of its Group,  a Borrowing  Base  Certificate as of the most recent
     Calculation Date, signed by an authorized Senior Executive of Servicer.

               (c)  Significant  Events  As soon as  possible  but in any  event
within two (2) Business Days after any Senior  Executive of Borrower or Servicer
becomes  aware  of  the  occurrence  of a  Significant  Event  or  an  Unmatured
Significant Event, Borrower or Servicer, as the case may be, will deliver to the
Agents for  distribution to the Lenders and LC Issuers an officer's  certificate
of Borrower  setting forth details of such event and the action that Borrower or
Servicer, as the case may be, proposes to take with respect thereto.

               (d) Servicing  Certificate Servicer shall deliver, or cause to be
delivered,  to the Administrative Agent for distribution to the Co-Agents, on or
before  the date that is 120 days  after  the end of each  year,  a  certificate
signed by any  Senior  Executive  of  Servicer,  dated as of the last day of the
preceding  year,  stating that (a) a review of the activities of Servicer during
the preceding  12-month period and of its  performance  under this Agreement has
been made under such officer's supervision and (b) to the best of such officer's
knowledge,  based on such review,  Servicer has fulfilled its obligations  under
the  Agreement  throughout  such year and has complied in all material  respects
with the Credit and  Collection  Policy,  or, if there has been a default in the
fulfillment of any such  obligation,  specifying each such default known to such
officer and the nature and status thereof.

               (e) Procedures Review. In connection with an inspection permitted
under  Section  9.1.11,  within ten (10)  Business Days after receipt of written
request  therefor,  information  reasonably  required to generate a report which
reasonably  satisfies the  requirements  set forth on Schedule  9.1.5 (each such
report,  a  "Procedures  Review"),  it being

                                       49
<PAGE>

acknowledged  and agreed that the  information  provided in connection  with the
pre-closing  review of Bowater and its  subsidiaries  reasonably  satisfied  the
requirements of such a Procedures Review (except for those relating to corporate
formality as specified in part V(d) of Schedule 9.1.5).

               (f) Other.  Promptly,  from time to time, such other information,
documents,  records or reports respecting the Collateral, the Receivables or the
condition or  operations,  financial or otherwise,  of Borrower or any Seller as
any of the Agents may from time to time  reasonably  request in order to protect
the interests of the  Administrative  Agent,  on behalf of the Secured  Parties,
under or as contemplated by this Agreement or the other Transaction Documents.

          9.1.6 Use of  Proceeds.  Borrower  will use the  proceeds of the Loans
     made  hereunder  solely in connection  with the  acquisition  or funding of
     Receivables,  to repay the Subordinated  Loans, to make Demand Loans and to
     make  dividends  in  accordance  with  applicable  corporate  law and  this
     Agreement.

          9.1.7 Separate Legal Entity.  Borrower  hereby  acknowledges  that the
     Lenders,  the LC Issuers and the Agents are entering into the  transactions
     contemplated  by this  Agreement  and the other  Transaction  Documents  in
     reliance upon Borrower's identity as a legal entity separate from any other
     Person.  Therefore, from and after the date hereof, Borrower shall take all
     reasonable steps to continue Borrower's identity as a separate legal entity
     and to make it apparent to third  Persons  that  Borrower is an entity with
     assets and liabilities  distinct from those of any other Person, and is not
     a division of any Seller or other Person.  Without  limiting the generality
     of the  foregoing and in addition to and  consistent  with the covenant set
     forth in  Section  9.1.2,  Borrower  shall  take such  actions  as shall be
     required in  order that:

          (a)  Borrower  will  be  a  limited   purpose  company  whose  primary
     activities are restricted in its  certificate of organization to owning the
     Receivables and Related Security and financing the acquisition  thereof and
     conducting  such other  activities as it deems  necessary or appropriate to
     carry out its primary activities;

          (b) Not less than one member of Borrower's  Board of Directors  (each,
     an  "Independent  Director")  shall be an individual who is not, and during
     the past five (5) years has not been, a director,  officer,  employee or 5%
     beneficial  owner of the  outstanding  common stock of any Person or entity
     beneficially  owning any  outstanding  shares of common stock of Bowater or
     any Affiliate thereof;  provided,  however, that an individual shall not be
     deemed to be ineligible to be an Independent  Director  solely because such
     individual  serves  or  has  served  in  the  capacity  of an  "independent
     director"  or similar  capacity  for  special  purpose  entities  formed by
     Bowater  or any of its  Affiliates.  The  certificate  of  organization  of
     Borrower  shall provide that (i) the Board of Directors  shall not approve,
     or take any other  action to cause the  filing of, a  voluntary  bankruptcy
     petition with respect to Borrower  unless the  Independent  Directors shall
     approve  the taking of

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<PAGE>

     such action in writing  prior to the taking of such  action,  and (ii) such
     provision  cannot be  amended  without  the prior  written  consent  of the
     Independent Directors;

          (c) Any employee,  consultant or agent of Borrower will be compensated
     from funds of Borrower, as appropriate, for services provided to Borrower;

          (d) Borrower will allocate and charge fairly and  reasonably  overhead
     expenses shared with any other Person. To the extent, if any, that Borrower
     and any other  Person share items of expenses  such as legal,  auditing and
     other professional services,  such expenses will be allocated to the extent
     practical on the basis of actual use or the value of services rendered, and
     otherwise on a basis  reasonably  related to the actual use or the value of
     services  rendered;  Borrower's  operating expenses will not be paid by any
     other  Person  except as  permitted  under the terms of this  Agreement  or
     otherwise consented to by the Agents;

          (e) Borrower's  books and records will be maintained  separately  from
     those of any other Person;

          (f)  All  audited   financial   statements  of  any  Person  that  are
     consolidated  to include  Borrower  will  contain  detailed  notes  clearly
     stating that (A) all of  Borrower's  assets are owned by Borrower,  and (B)
     Borrower is a separate legal entity;

          (g) Borrower's  assets will be maintained in a manner that facilitates
     their identification and segregation from those of any other Person;

          (h)  Borrower  will  strictly  observe  corporate  formalities  in its
     dealings with all other Persons, and funds or other assets of Borrower will
     not  be  commingled  with  those  of  any  other  Person  except  for  such
     commingling as is permitted pursuant to Section 11.2.3(d);

          (i) Borrower shall not, directly or indirectly, be named or enter into
     an agreement to be named,  as a direct or  contingent  beneficiary  or loss
     payee,  under any insurance  policy with respect to any amounts payable due
     to occurrences or events related to any other Person; and

          (j) Any  Person  that  renders  or  otherwise  furnishes  services  to
     Borrower will be  compensated  thereby at market rates for such services it
     renders or otherwise  furnishes thereto.  Borrower will not hold itself out
     to be  responsible  for the debts of any other  Person or the  decisions or
     actions respecting the daily business and affairs of any other Person.

     9.1.8 Adverse  Claims on  Receivables.  Each of Borrower and Servicer will,
and will require each Seller to, defend each  Receivable  against all claims and
demands of all Persons at any time  claiming  the same or any  interest  therein


                                       51
<PAGE>

adverse  to the  Administrative  Agent's  security  interest,  on  behalf of the
Secured Parties.

     9.1.9  Further  Assurances.  At its expense,  each of Borrower and Servicer
will perform all acts and execute all documents  reasonably  requested by any of
the Agents at any time to evidence,  perfect,  maintain and enforce the title or
the  security  interest of the  Administrative  Agent,  on behalf of the Secured
Parties,  in the  Receivables  and the  priority  thereof.  Each of Borrower and
Servicer  will,  at the  reasonable  request of any of the  Agents,  execute and
deliver financing  statements  relating to or covering the Collateral and, where
permitted by law, Borrower shall authorize the Administrative  Agent to file one
or more financing statements without Borrower's  signature.  Borrower shall, and
shall cause each Seller to, mark its master data processing  records relating to
the Receivables  with a legend stating that "The accounts  receivable of Bowater
Incorporated  and  Bowater  America  Inc.  reflected  herein  have  been sold or
contributed,  directly or indirectly,  to Bowater  Funding Inc.  (`SPC'),  and a
security  interest  in such  receivables  has been  granted  by SPC to  SunTrust
Capital Markets, Inc., as administrative agent for various parties".

     9.1.10 Servicing. Servicer shall (a) take all commercially reasonable steps
to (i) prevent or minimize  any loss being  realized  on a  Receivable  and (ii)
recover  the full  amount  of such  loss,  and (b)  follow  such  practices  and
procedures  for servicing  the  Receivables,  in accordance  with the Credit and
Collection  Policy, as would be customary and usual for a prudent servicer under
similar  circumstances,  including using reasonable  efforts to realize upon any
recourse to the Obligors.

     9.1.11  Inspection.  Each of Borrower and Servicer shall permit the Agents,
the LC Issuers, the Lenders and their duly authorized representatives, attorneys
or auditors to inspect the Receivables,  the Receivable Files, Documents and the
related accounts,  records and computer  systems,  software and programs used or
maintained  by Borrower  or  Servicer at such times as any Agent may  reasonably
request;  provided,  however,  that,  prior to a  Bowater  Downgrade  and in the
absence  of a  Significant  Event,  Borrower  and its  Affiliates  will  only be
required to pay for the first such  inspection by any or all of the Agents,  the
LC Issuers, the Lenders and their duly authorized representatives,  attorneys or
auditors in any calendar year, and provided  further,  in the event of a Bowater
Downgrade,  Borrower  and its  Affiliates  shall only be required to pay for the
first two (2) such examinations by any or all of the Agents, the LC Issuers, the
Lenders and their duly authorized representatives,  attorneys or auditors in any
calendar  year,  and provided  further,  that from and after the occurrence of a
Significant Event,  Borrower and its Affiliates shall be responsible to pay for,
and the  Administrative  Agent (or its  representatives)  shall be  entitled  to
conduct, as many examinations as the Administrative  Agent may deem necessary or
appropriate to protect the interests of the Secured Parties.  Upon  instructions
from any of the Agents, each of Borrower and Servicer shall release any document
in its possession  related to any Receivable (other than confidential  financial


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<PAGE>

information  of  the  related  Obligor  which  Borrower  and  Servicer  are  not
authorized  to disclose) to such Agent,  as the case may be, or to the Servicer,
if requested by any of the Agents.

     9.1.12  Cooperation.  Each of Borrower  and  Servicer  shall  provide  such
cooperation,  information and assistance, and prepare and supply the Agents with
such data regarding the performance by the Obligors of their  obligations  under
the Receivables and the performance by Borrower and Servicer of their respective
obligations under the Transaction  Documents,  as may be reasonably requested by
any of the Agents from time to time.

     9.1.13  Facility.  Servicer  shall  maintain  its  facility  from  which it
services  the  Receivables  in its  present  condition,  ordinary  wear and tear
excepted,  or such other  facility of similar  quality,  security  and safety as
Servicer  may select from time to time.  Servicer  shall make all  property  tax
payments,  lease  payments and all other payments with respect to such facility.
Servicer shall,  in connection  with any inspection  under Section 9.1.11 and at
all times following the occurrence and during the continuance of any Significant
Event, (i) ensure that the Agents shall have complete and  unrestricted  access,
at  Servicer's  expense,  to such  facility and all  computers and other systems
relating to the servicing of the  Receivables  and all persons  employed at such
facility,  (ii) use its best efforts to retain  employees based at such facility
to provide assistance to the Administrative Agent and (iii) continue to store on
a daily basis all back-up files relating to the Receivables and the servicing of
the  Receivables  at Servicer's  facilities,  or such other storage  facility of
similar  quality,  security and safety as Servicer may select from time to time,
in the case of each of  clauses  (i),  (ii) and (iii)  until the  receipt of all
Collections in respect of all Receivables or all  Receivables  have been written
off in accordance with the Credit and Collection Policy.

     9.1.14  Accounts.  Borrower shall not maintain any bank accounts other than
the  accounts  described  on  Schedule  8.12.  Except  as set  forth in the last
sentence of Section  11.2.3(b),  neither  Borrower nor Servicer  shall make, nor
will either of them permit any Seller to make, any change in its instructions to
Obligors  regarding  payments  to be made to a  LockBox.  Neither  Borrower  nor
Servicer  will,  nor will  either of them  permit any Seller to add any  LockBox
Account  Bank or Lock Box Account to those  listed on  Schedule  8.12 unless the
Administrative Agent shall have consented thereto and received a copy of any new
duly executed LockBox Account Agreement. Neither Borrower nor Servicer will, nor
will either of them permit any Seller to,  change any  LockBox  Account  Bank or
close any LockBox or LockBox Account unless the Administrative  Agent shall have
received at least thirty (30) days' prior notice of such  termination and (i) in
the case of a closed LockBox, all applicable Obligors have been notified to make
payments to another  LockBox  that  clears  through a LockBox  Account  which is
subject to a LockBox Account Agreement,  or (ii) in the case of termination of a
LockBox Bank or closing of a LockBox Account, a new LockBox Account Agreement is
entered into with respect to any new or replacement  LockBox  Account or LockBox
Account Bank.

     Section 9.2 Negative  Covenants.  From the date hereof until the first day,
following the Commitment  Termination  Date, on which all Obligations shall have
been finally

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<PAGE>

and fully paid and performed,  each of Borrower and Servicer hereby
covenants and agrees as to itself as follows:

          9.2.1 Sales,  Liens,  Etc. Except pursuant to, or as contemplated  by,
the Transaction  Documents,  Borrower shall not (and shall not permit  Servicer,
acting on Borrower's  behalf to) sell, assign (by operation of law or otherwise)
or  otherwise   dispose  of,  or  create  or  suffer  to  exist  voluntarily  or
involuntarily  any  Adverse  Claims  upon or with  respect to any of  Borrower's
assets, including,  without limitation,  the Collateral, any interest therein or
any right to receive any amount from or in respect thereof.

          9.2.2 Mergers, Acquisitions,  Sales, Subsidiaries, etc. Borrower shall
not:

          (a)  be a  party  to any  merger  or  consolidation,  or  directly  or
     indirectly  purchase or otherwise  acquire all or substantially  all of the
     assets or any stock of any class of, or any  partnership  or joint  venture
     interest in, any other Person, except for Permitted  Investments,  or sell,
     transfer,  assign,  convey or lease any of its  property and assets (or any
     interest  therein)  other than  pursuant  to, or as  contemplated  by, this
     Agreement or the other Transaction Documents;

          (b)  make,   incur  or  suffer  to  exist  an  investment  in,  equity
     contribution  to, loan or advance to, or payment  obligation  in respect of
     the deferred purchase price of property from, any other Person,  except for
     Permitted Investments or pursuant to the Transaction Documents;

          (c) create any direct or  indirect  Subsidiary  or  otherwise  acquire
     direct or indirect  ownership  of any equity  interests in any other Person
     other than pursuant to the Transaction Documents; or

          (d) enter  into any  transaction  with any  Affiliate  except  for the
     transactions   contemplated   by  the   Transaction   Documents  and  other
     transactions upon fair and reasonable terms materially no less favorable to
     Borrower  than would be obtained in a comparable  arm's length  transaction
     with a Person not an Affiliate.

          9.2.3  Change in  Business;  Change in Credit and  Collection  Policy.
     Borrower will not make any change in the character of its business. Neither
     Borrower  nor  Bowater  will make any change in the  Credit and  Collection
     Policy  except  (i) to the extent  such  change or  amendment  would not be
     reasonably likely to materially and adversely affect the  collectibility of
     Receivables  or to  materially  decrease  the  credit  quality of any newly
     created Receivables or (ii) to the extent such change or amendment has been
     consented to by Borrower and the Co-Agents.

          9.2.4 Other Debt. Borrower will not incur any Debt to any Person other
     than pursuant to the Transaction Documents.

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<PAGE>

          9.2.5   Organizational   Documents.   Borrower  shall  not  amend  its
     Organizational Documents.

          9.2.6  Jurisdiction  of  Organization;  Location of Records.  Borrower
     shall not change its  jurisdiction  of organization or permit the documents
     and records  evidencing the  Receivables to be moved unless (i) Borrower or
     Servicer,  as the case may be, shall have given to the Administrative Agent
     prior written notice thereof, clearly describing the new location, and (ii)
     Borrower shall have taken such action,  satisfactory to the  Administrative
     Agent,  to maintain  the title or  ownership  of Borrower  and any security
     interest  of the  Administrative  Agent,  for the  benefit  of the  Secured
     Parties) in the  Collateral at all times fully  perfected and in full force
     and effect.  Servicer  shall not, in any event,  move the location where it
     conducts the servicing and collection of the  Receivables  from the address
     referred to on Schedule 15.3 to this  Agreement,  without the prior written
     consent  of  the   Administrative   Agent,   which  consent  shall  not  be
     unreasonably withheld or delayed.

          9.2.7 Financing  Statements.  Borrower shall not execute any effective
     financing  statement (or similar  statement or  instrument of  registration
     under  the  laws  of  any  jurisdiction)  or  statements  relating  to  any
     Receivables other than the financing statements described in Section 7.1.5.

          9.2.8  Business  Restrictions.  Borrower  shall not (i)  engage in any
     business   other  than  the   acquisition,   financing  and  collection  of
     Receivables and other  Collateral,  (ii) engage in any transactions or be a
     party  to  any  documents,   agreements  or  instruments,  other  than  the
     Transaction  Documents  and those  incidental to the purposes  thereof,  or
     (iii) incur any trade payables (other than for  professional  fees incurred
     in the ordinary course of business) or other  liabilities not  constituting
     Debt permitted under Section 9.2.4 if the aggregate  outstanding balance of
     such trade payables and other liabilities would at any time exceed $10,749,
     provided,  however, that the foregoing will not restrict Borrower's ability
     to pay servicing  compensation as provided herein, and, provided,  further,
     that so long as no Significant  Event or Unmatured  Significant Event shall
     have  occurred and be continuing  and  Borrower's  Net Worth,  after giving
     effect thereto, is at least $2,000,000,  Borrower shall be permitted to (a)
     pay amounts due on the  Subordinated  Note, (b) make  distributions  to its
     equity owners to the extent permitted by applicable law and this Agreement,
     and (c) make Demand Loans to Bowater and BAI.

          9.2.9 Other  Agreements;  Performance  Undertaking.  Borrower will not
     amend,  restate,  supplement,  cancel,  terminate or  otherwise  modify the
     Receivables  Sale  Agreement or the  Performance  Undertaking,  or give any
     consent,  waiver,  directive or approval  thereunder  or waive any default,
     action,  omission or breach under any of the  foregoing or otherwise  grant
     any indulgence thereunder, without (in each case) the prior written consent
     of each of the Agents.

                                   ARTICLE X.
                       SIGNIFICANT EVENTS AND THEIR EFFECT

     Section 10.1 Events of Default.  Each of the following shall  constitute an
"Event of Default" under this Agreement:


          10.1.1  Non-Payment of Loans, Etc. (a) Borrower shall fail to make any
     payment  of any  principal  of any Loan  when due and  such  failure  shall
     continue for one (1) Business  Day, or (b) Borrower  shall fail to make any
     payment  of any  interest  on any  other  Obligation  payable  by  Borrower
     hereunder  or under the other  Transaction  Documents,  including,  without
     limitation,  any interest,  Fees and Indemnified  Amounts, or shall fail to
     make any deposit required to be made hereunder when due and, in each of the
     foregoing  cases in this clause (b), such failure shall  continue for three
     (3) Business Days.

          10.1.2 Non-Compliance with Other Provisions. Borrower shall:


          (a) fail to perform or observe any  covenant  contained in Section 9.2
     of this  Agreement  and such failure shall remain  unremedied  (A) past the
     next Distribution Date, or, if earlier, (B) more than two (2) Business Days
     after the earlier to occur of (i) any Senior  Executive of Borrower  having
     knowledge  thereof  and  (ii)  any  Senior  Executive  of  Borrower  having
     knowledge thereof, or

          (b) fail to perform or observe any other term,  covenant or  agreement
     contained in this Agreement or any other  Transaction  Document on its part
     to be performed or observed and, except as provided in Section 10.2.2,  any
     such failure shall remain  unremedied for thirty (30) days after any Senior
     Executive of Borrower  having  received  written notice thereof from any of
     the Agents.

          10.1.3 Breach of Representations  and Warranties.  Any representation,
     warranty,  certification  or statement made by Borrower in this  Agreement,
     any other Transaction Document to which Borrower is a party or in any other
     document  delivered  pursuant  hereto or thereto  shall  prove to have been
     incorrect in any material  respect when made or deemed made;  provided that
     the materiality  threshold in the preceding  clause shall not be applicable
     with respect to any  representation  or warranty  which  itself  contains a
     materiality threshold.

          10.1.4  Bankruptcy.  An Event of  Bankruptcy  shall have  occurred and
     remained  continuing  with  respect to  Borrower,  Servicer or  Performance
     Guarantor.

          10.1.5 Tax and ERISA Liens.  The Internal  Revenue  Service shall file
     notice of a lien  pursuant to ss. 6323 of the  Internal  Revenue  Code with
     regard to any of the assets of  Borrower or the  Pension  Benefit  Guaranty
     Corporation shall file a notice of lien pursuant to ss. 4068 of ERISA, with
     regard to any assets of  Borrower,  and in either of the  foregoing  cases,
     such lien shall not have been released within fifteen (15) Business Days.


                                    56
<PAGE>

          Section  10.2  Amortization   Events.  Each  of  the  following  shall
     constitute an "Amortization Event" under this Agreement:


          10.2.1  Servicer  Event of Default.  A Servicer Event of Default shall
     have occurred and remained continuing.


          10.2.2  Collateral  Reporting.  Borrower  and  Servicer  shall fail to
     deliver any Borrowing Base  Certificate or Monthly Report within 1 Business
     Day after the same is due and  notification  is provided by any Co-Agent or
     in any event within 2 Business Days after the same is due.

          10.2.3  Borrowing  Base Deficit.  A Borrowing Base Deficit shall exist
     and such condition shall continue  unremedied until the earlier to occur of
     the next Distribution Date and the second Business Day after such Borrowing
     Base Deficit arose.

          10.2.4 Default Ratio. The Default Ratio shall equal or exceed 2.38% on
     a rolling three-month average basis.

          10.2.5 Dilution Ratio.  The Dilution Ratio shall equal or exceed 4.12%
     on a rolling three-month average basis.

          10.2.6  Delinquency Ratio. The Delinquency Ratio shall equal or exceed
     2.24% on a rolling three-month average basis.

          10.2.7 Event of Default.  An Event of Default  shall have occurred and
     be continuing.

          10.2.8  Validity  of  Transaction   Documents.   (a)  Any  Transaction
     Document,  or any  lien or  security  interest  granted  thereunder,  shall
     (except in  accordance  with its  terms),  in whole or in part,  terminate,
     cease to be  effective  or  cease  to be the  legally  valid,  binding  and
     enforceable  obligation  of Borrower,  Servicer or any Seller party to such
     Transaction Document,  (b) Borrower, any Seller or Servicer shall, directly
     or indirectly, contest in any manner such effectiveness,  validity, binding
     nature  or  enforceability  or  (c)  any  security  interest  securing  any
     Obligation  shall,  in  whole or in part,  cease  to be a  perfected  first
     priority security interest.

          10.2.9  Termination Date. The "Termination  Date" under and as defined
     in the Receivables Sale Agreement shall occur. -

          10.2.10 Performance  Undertaking.  Performance Guarantor shall fail to
     perform or observe any term, covenant or agreement required to be performed
     by it under the Performance  Undertaking,  or the  Performance  Undertaking
     shall  cease  to be  effective  or to be the  legally  valid,  binding  and
     enforceable obligation of Performance  Guarantor,  or Performance Guarantor
     shall  directly or  indirectly  contest in any manner  such  effectiveness,
     validity, binding nature or enforceability.

                                       57
<PAGE>

          10.2.11  Change of Control.  Bowater  shall cease to own,  directly or
     indirectly, 100% of the outstanding voting stock of BAI, or BAI shall cease
     to own 100% of the outstanding voting stock of Borrower.

         Section 10.3 Effect of Significant Event.

          10.3.1  Optional  Termination.  Upon the  occurrence  and  during  the
     continuance  of a  Significant  Event  (other  than  an  Event  of  Default
     described in Section 10.1.4),  the  Administrative  Agent may, and shall at
     the direction of any  Co-Agent,  by notice to Borrower and the Co-Agents (a
     copy of which shall be promptly  forwarded by each of the Co-Agents to each
     applicable Rating Agency), declare all or any portion of the Obligations to
     be due and payable,  the LC Issuers' several obligations to issue Letter of
     Credit to be terminated  and/or the Commitments of the Committed Lenders to
     make Loans (if not  theretofore  terminated)  to be terminated by declaring
     the Commitment Termination Date to have occurred, whereupon the full unpaid
     amount of such Loans and other  Obligations  which shall be so declared due
     and  payable  shall be and  become  immediately  due and  payable,  without
     further  notice,  demand or  presentment,  and/or,  as the case may be, the
     Commitments shall terminate.

          10.3.2  Automatic  Termination.  Upon  the  occurrence  of an Event of
     Default described in Section 10.1.4, the Commitment  Termination Date shall
     be deemed to have occurred automatically,  and all Obligations shall become
     immediately and  automatically  due and payable,  all without  presentment,
     demand, protest, or notice of any kind.

          10.3.3  Notice to Rating  Agencies.  Each  Co-Agent  shall notify each
     applicable  Rating Agency of the occurrence of any  continuing  Significant
     Event, promptly following its actual knowledge thereof.

          10.3.4  Cash-Collateralization of LC Obligations. Upon acceleration of
     the LC Obligations  pursuant to Section 10.3.1 or Section 10.3.2,  Borrower
     shall be and become thereby unconditionally obligated,  without any further
     notice,  act or demand,  to pay to the LC Issuers,  an amount  equal to all
     Reimbursement  Obligations  then  outstanding,  together  with  accrued and
     unpaid  interest  and L/C Fees  thereon,  and to deposit into the Letter of
     Credit Collateral  Accounts an aggregate amount equal to the Aggregate Face
     Amount Outstanding, together with an amount equal to the L/C Fees that will
     accrue  thereon  through the expiry date of each Letter of Credit.  Each LC
     Issuer may at any time or from time to time after  funds are  deposited  in
     its Letter of Credit Collateral Account, apply such funds to the payment of
     draws  under  outstanding  Letters  of  Credit  issued  by it and any other
     amounts as shall from time to time have  become due and payable by Borrower
     to such LC Issuer  under  the  Transaction  Documents.  After all of the LC
     Obligations have been indefeasibly paid in full and the several obligations
     of the LC Issuers to issue Letters of Credit has been terminated, any funds
     remaining in the Letter of Credit Collateral  Accounts shall be returned by
     the LC Issuers to  Borrower  or paid to  whomever  may be legally  entitled
     thereto at such time.

          10.3.5  Additional  Remedies.  Upon the  occurrence of the  Commitment
     Termination  Date  pursuant to this Section 10.3, no Advances will be made,
     no  Letters of Credit  will be issued,  and the  Administrative  Agent,  on
     behalf of the Secured Parties,  shall have, in addition to all other rights


                                       58
<PAGE>

     and  remedies  under this  Agreement  or  otherwise,  all other  rights and
     remedies  provided under the UCC of each applicable  jurisdiction and other
     applicable laws, which rights shall be cumulative.

          10.3.6  Italian  Receivables.  Upon the  occurrence  of a  Significant
     Event, the  Administrative  Agent may, in order to maximize proceeds of the
     Collateral,  notify  Borrower and the  Co-Agents  that the amount,  if any,
     advanced against Receivables owing from Obligors domiciled in Italy will be
     deemed  to  have  been  payment  for  such   Receivables,   whereupon   the
     Administrative   Agent,  on  behalf  of  the  Secured  Parties,  is  hereby
     subrogated to Borrower's rights against the Obligors thereof.

                                   ARTICLE XI.
                                  THE SERVICER

     Section 11.1 Bowater as Initial Servicer. The servicing,  administering and
collection of the Receivables  shall be conducted by the Person  designated from
time to time as Servicer  under this  Agreement.  Until such time  following the
occurrence  and during  the  continuance  of a  Servicer  Event of Default or an
Amortization  Event  as  the  Administrative  Agent,  at  the  direction  of any
Co-Agent, shall notify Bowater and Borrower in writing of the revocation of such
power and authority, Borrower, the Lenders, the LC Issuers and the Agents hereby
appoint Bowater to act as Servicer under the Transaction Documents.

     Section 11.2 Certain Duties of the Servicer.

          11.2.1  Authorization  to Act as  Borrower's  Agent.  Borrower  hereby
     appoints  Servicer as its agent for the following  purposes:  (i) selecting
     the amount of each  requested  Loan and  executing  Borrowing  Requests  on
     behalf  of  Borrower,   (ii)  making  transfers  among,   deposits  to  and
     withdrawals  from  all  deposit  accounts  of  Borrower  for  the  purposes
     described in the Transaction Documents, (iii) arranging payment by Borrower
     of all Fees,  expenses,  other  Obligations and other amounts payable under
     the Transaction Documents, (iv) causing the repayment and prepayment of the
     Loans as required and  permitted  pursuant to Section 4.1 and (v) executing
     and  preparing  the  Monthly   Reports  and  Borrowing   Base   -----------
     Certificates;  provided,  however, that Servicer shall act in such capacity
     only as an  agent  of  Borrower  and  shall  incur  thereby  no  additional
     obligations with respect to any Loan, and nothing herein shall be deemed to
     authorize Servicer to take any action as Borrower's agent which Borrower is
     precluded from taking itself. Borrower irrevocably agrees that (A) it shall
     be bound by all proper actions taken by Servicer  pursuant to the preceding
     sentence,  and (B) the Agents,  the LC  Issuers,  the Lenders and the banks
     holding  all  deposit   accounts  of  Borrower   are   entitled  to  accept
     submissions,   determinations,   selections,   specifications,   transfers,
     deposits and withdrawal  requests,  and payments from Servicer on behalf of
     Borrower.

          11.2.2 Servicer to Act as Servicer.

          (a) Servicer shall service and administer the Receivables on behalf of
     Borrower  and the  Administrative  Agent (for the  benefit  of the  Secured
     Parties)

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     and shall  have full  power and  authority,  acting  alone  and/or  through
     subservicers  as  provided in Section  11.2.2(c),  to do any and all things
     which it may deem reasonably necessary or desirable in connection with such
     servicing and  administration and which are consistent with this Agreement.
     Consistent with the terms of this Agreement,  Servicer may waive, modify or
     vary any term of any  Receivable or consent to the  postponement  of strict
     compliance  with any such term or in any manner,  grant  indulgence  to any
     Obligor  if,  in   Servicer's   reasonable   determination,   such  waiver,
     modification,  postponement or indulgence is not materially  adverse to the
     interests of Borrower or the  Administrative  Agent (for the benefit of the
     Secured  Parties);  provided,  however,  that  Servicer  may not permit any
     modification  with respect to any  Receivable  that would reduce the Unpaid
     Balance  (except  for  actual  payments  thereof),  or extend  the due date
     thereof,  except  that  Servicer  may take such  actions  with  respect  to
     Defaulted  Receivables  if such  actions  will,  in  Servicer's  reasonable
     business judgment,  maximize the Collections thereof.  Without limiting the
     generality  of the  foregoing,  Servicer  in its own name or in the name of
     Borrower is hereby  authorized  and  empowered  by Borrower  when  Servicer
     believes it  appropriate  in its best  judgment to execute and deliver,  on
     behalf  of  Borrower,   any  and  all   instruments  of   satisfaction   or
     cancellation,  or of partial or full  release  or  discharge  and all other
     comparable instruments, with respect to the Receivables.

          (b) Servicer shall service and administer the Receivables by employing
     such procedures  (including  collection  procedures) and degree of care, in
     each case  consistent  with  applicable law, with the Credit and Collection
     Policy and with prudent industry standards,  as are customarily employed by
     Servicer in servicing and  administering  receivables  owned or serviced by
     Servicer comparable to the Receivables.  Servicer shall not take any action
     to impair  the  Administrative  Agent's  (for the  benefit  of the  Secured
     Parties) security interest in any Receivable,  except to the extent allowed
     pursuant to this Agreement or required by law.

          (c) At any time  while  Bowater is acting as the  Servicer  hereunder,
     Bowater may  delegate,  and Bowater  hereby  advises  the  Lenders,  the LC
     Issuers and the Agents that it has delegated,  to BAI, as  sub-servicer  of
     the  Servicer,  certain  of its  duties and  responsibilities  as  Servicer
     hereunder. Without the prior written consent of each of the Agents, Bowater
     shall not be permitted to delegate any of its duties or responsibilities as
     Servicer to any Person  other than (i)  Borrower,  (ii) BAI, and (iii) with
     respect to certain Defaulted  Receivables,  outside collection  agencies in
     accordance with its customary practices.  Neither Borrower nor BAI shall be
     permitted  to  further  delegate  to any other  Person any of the duties or
     responsibilities of the Servicer delegated to it by Bowater. If at any time
     following the occurrence and during the  continuance of a Servicer Event of
     Default or Amortization Event, the Administrative  Agent shall designate as
     Servicer any Person  other than  Bowater,  all duties and  responsibilities
     theretofore  delegated by Bowater to Borrower or BAI may, at the discretion
     of any of the  Agents,  be  terminated  forthwith  on  notice  given by the
     Administrative  Agent to Bowater and to Borrower  and BAI.  Notwithstanding
     the  foregoing:  (i) Bowater

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     shall be and remain primarily liable to the Agents,  the LC Issuers and the
     Lenders   for  the  full  and   prompt   performance   of  all  duties  and
     responsibilities  of the  Servicer  hereunder  and (ii) the Agents,  the LC
     Issuers and the Lenders shall be entitled to deal  exclusively with Bowater
     in matters  relating  to the  discharge  by the  Servicer of its duties and
     responsibilities hereunder.

          (d) Except as provided in the  penultimate  sentence of the  preceding
     clause  (c),  the  Agents,  the LC  Issuers  and the  Lenders  shall not be
     required to give notice,  demand or other communication to any Person other
     than  Bowater  in  order  for   communication   to  the  Servicer  and  its
     sub-servicer  or other  delegate with respect  thereto to be  accomplished.
     Bowater,  at all times that it is the Servicer,  shall be  responsible  for
     providing  any  sub-servicer  or other  delegate of the  Servicer  with any
     notice given to the Servicer under this Agreement.

          (e) Servicer may take such actions as are  necessary to discharge  its
     duties as Servicer in accordance with this  Agreement,  including the power
     to execute and deliver on behalf of Borrower such instruments and documents
     as  may be  customary,  necessary  or  desirable  in  connection  with  the
     performance of Servicer's duties under this Agreement  (including consents,
     waivers and discharges relating to the Receivables).

          (f) Servicer  shall keep separate  records  covering the  transactions
     contemplated  by this  Agreement,  including  the identity  and  collection
     status of each  Receivable  purchased  by Borrower  from any Seller and the
     Purchase Price Credits.

        11.2.3 Collections.

          (a) On or prior to the Closing Date,  Borrower and Servicer shall have
     established  and  shall  maintain   thereafter  the  following   system  of
     collecting and processing Collections of Receivables: The Obligors shall be
     instructed  to make  payments of  Receivables  only (i) by check,  draft or
     money order  mailed to a LockBox  listed on Schedule  8.12 (such  payments,
     upon  receipt  in  such a  LockBox,  being  referred  to  herein  as  "Mail
     Payments"),  or (ii) by  wire  transfer,  SWIFT,  ACH or  other  electronic
     payment to a LockBox Account.

          (b) On or prior to the Closing Date,  the  Administrative  Agent shall
     have  received a LockBox  Agreement  with respect to each LockBox  Account.
     Servicer's  right of access to any LockBox  Account shall be revocable upon
     notice  from  the  Administrative  Agent,  at the  direction  of any of the
     Co-Agents,  following  the  occurrence  and  during  the  continuance  of a
     Servicer Event of Default,  an Event of Default or an Incipient  Bankruptcy
     for distribution to the Servicer and, on Distribution Dates, application in
     accordance  with  Article  IV  (it  being   understood  that  an  Incipient
     Bankruptcy shall not, in and of itself, lead to the Commitment  Termination
     Date). In addition,  after the occurrence and during the continuance of any
     Servicer Event of Default or an Event of Default,  Servicer  agrees that it
     shall, upon the written request of all of the Agents, notify all

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     Obligors under  Receivables to make payment thereof to (i) one or more bank
     accounts and/or  post-office boxes designated by the  Administrative  Agent
     and  specified  in such  notice or (ii) any  successor  Servicer  appointed
     hereunder.  No Agent,  LC Issuer or Lender shall,  inter alia, (x) take any
     action  under  LockBox  Agreement or (y) deliver any notice to any Obligor,
     absent the existence of a Servicer Event of Default or an Event of Default.

          (c)  Servicer  shall  remove  all Mail  Payments,  or  cause  all Mail
     Payments to be removed,  from each LockBox by the close of business on each
     Business Day and deposited into a LockBox  Account.  Servicer shall process
     all such Mail Payments, and all other payments received in any form, within
     three (3) Business Days of the date such payment is received by Bowater, by
     recording  the amount of the  payment  received  from the  Obligor  and the
     applicable account or invoice number.

          (d) All  Collections  received by any Seller or Servicer in respect of
     Receivables will, pending remittance to a LockBox Account,  be held by such
     Seller or Servicer in trust for the exclusive benefit of the Administrative
     Agent, on behalf of the Secured  Parties,  and shall not be commingled with
     any other  funds or property of any Seller or  Servicer;  provided  that it
     shall not  constitute  commingling  in violation  of this  Agreement or any
     Transaction Document if such funds or property not representing Collections
     are deposited to the same account to which  Collections  are deposited,  so
     long as Servicer  maintains adequate books and records to properly identify
     such respective  funds,  and such funds are so identified  within three (3)
     Business Days after deposit in such account.

          (e)  Borrower  and  Servicer  hereby  irrevocably  waive  any right to
     set-off  or  otherwise  deduct  any  amount  owing  by or to them  from any
     Collections received by them prior to remittance thereof in accordance with
     this Agreement.

          (f) In performing its duties and obligations  hereunder,  Servicer (i)
     shall not impair the rights of Borrower  or the  Administrative  Agent,  on
     behalf of the Secured Parties, in any Receivable,  (ii) shall not amend the
     terms of any  Receivable  other  than in  accordance  with the  Credit  and
     Collection  Policy and this  Agreement,  (iii)  shall not release any goods
     securing a Receivable  from the lien created by such  Receivable  except as
     specifically provided for herein, and (iv) shall be entitled to commence or
     settle  any legal  action to enforce  collection  of any  Receivable  or to
     foreclose  upon or repossess  any goods  securing such  Receivable.  In the
     event that  Servicer  shall breach any of its covenants set forth in clause
     (i), (ii) or (iii) of this Section 11.2.3(f), Servicer shall pay the Unpaid
     Balance  of each  Receivable  affected  thereby  on the  Distribution  Date
     following  the  Calculation  Period in which  such  event  occurs.  For the
     purposes  of  Section  11.7  hereof,  Servicer  shall not be deemed to have
     breached its obligations  under this Section 11.2.3(f) unless it shall fail
     to make such payment with respect to any Receivable  affected by Servicer's
     noncompliance  with clause (i), (ii) or (iii) of this Section  11.2.3(f) on
     such Distribution Date.

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          (g) All payments or other amounts collected or received by Servicer in
     respect of a  Receivable  shall be  applied  to the Unpaid  Balance of such
     Receivable.

          11.2.4  Settlement.   On  each  Distribution   Date,   Servicer  shall
     distribute the Collections in accordance with Article IV hereof.

     Section 11.3 Servicing  Compensation.  Servicer,  as  compensation  for its
activities  hereunder,  shall be entitled to receive the  Servicing  Fee,  which
shall be payable by  Borrower  on each  Distribution  Date from  Collections  in
accordance  with  Section  4.2.  Servicer  shall be required to pay all expenses
incurred by it in connection with its servicing  activities hereunder (including
payment of the fees and expenses of any  subservicer)  and shall not be entitled
to reimbursement therefor except as specifically provided herein.

     Section 11.4 Agreement Not to Resign. Bowater acknowledges that the Agents,
the LC Issuers and the  Lenders  have relied on  Bowater's  agreement  to act as
Servicer  hereunder  in their  respective  decisions  to execute and deliver the
respective  Transaction  Documents to which they are parties.  In recognition of
the foregoing,  Bowater agrees not to resign as Servicer voluntarily,  except as
required by law (as  evidenced by the delivery of an outside  opinion of counsel
to the Agents,  in form and substance  satisfactory to the Agents),  without the
prior written consent of each of the Agents.

   Section 11.5 Designation of Servicer. Borrower agrees not to designate any
Person other than Bowater as Servicer  without the prior written consent of each
of the Agents.

     Section 11.6 Termination. The authorization of Servicer to act on behalf of
Borrower  under  this  Agreement  and  the  other  Transaction  Documents  shall
terminate  at  the  sole  discretion  of  the  Administrative   Agent  upon  the
replacement of Servicer by a successor  Servicer selected by at least two (2) of
the  Co-Agents  following  a Servicer  Event of Default or another  Amortization
Event.

     Section  11.7  Servicer  Events of  Default.  Each of the  following  shall
constitute a "Servicer Event of Default" under this Agreement:

          11.7.1  Failure to Make Payments and Deposits.  Servicer shall fail to
     make any payment or deposit required to be made by it hereunder on the date
     when due and, in each of the foregoing  cases,  such failure shall continue
     for one (1) Business  Day in the case of  principal  and three (3) Business
     Days in the case of any other Obligation.

          11.7.2  Non-Compliance  with Other Provisions.  Servicer shall fail to
     perform or observe any other term,  covenant or agreement contained in this
     Agreement or any other Transaction  Document on its part to be performed or
     observed and any such failure shall remain unremedied for thirty (30) days.

          11.7.3   Delegation.   Servicer  shall  delegate  any  of  its  duties
     hereunder, except as expressly permitted under Section 11.2.2(c) and (d).

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          11.7.4 Breach of Representations  and Warranties.  Any representation,
     warranty,  certification  or statement made by Servicer in this  Agreement,
     any  other  Transaction  Document  to which  Servicer  is a party or in any
     Borrowing Base  Certificate,  Monthly  Report or other  document  delivered
     pursuant  hereto  or  thereto  shall  prove to have been  incorrect  in any
     material  respect when made or deemed made;  provided that the  materiality
     threshold in the preceding  clause shall not be applicable  with respect to
     any   representation  or  warranty  which  itself  contains  a  materiality
     threshold.

          11.7.5  Bankruptcy.  An Event of  Bankruptcy  shall have  occurred and
     remained continuing with respect to Servicer.

          11.7.6 Judgments.

          (a) A final  judgment or judgments  for the payment of money in excess
     of  $10,000,000  in the  aggregate  (exclusive  of judgment  amounts  fully
     covered by insurance where the insurer has admitted liability in respect of
     such judgment) or in excess of $50,000,000 in the aggregate  (regardless of
     insurance coverage) shall be rendered by one or more courts, administrative
     tribunals or other bodies having jurisdiction  against Bowater and the same
     shall  not  be  discharged  (or  provision  shall  not  be  made  for  such
     discharge),  or a stay of execution  thereof shall not be procured,  within
     thirty  (30) days from the date of entry  thereof  and  Bowater  shall not,
     within said period of thirty (30) days,  or such longer period during which
     execution of the same shall have been stayed,  appeal  therefrom  and cause
     the execution thereof to be stayed during such appeal, or

          (b) A final  judgment or judgments  for the payment of money in excess
     of $10,749 in the aggregate  (regardless  of insurance  coverage)  shall be
     rendered by one or more  courts,  administrative  tribunals or other bodies
     having  jurisdiction  against Borrower and the same shall not be discharged
     (or provision shall not be made for such discharge), or a stay of execution
     thereof  shall not be  procured,  within  thirty (30) days from the date of
     entry  thereof and  Borrower  shall not,  within said period of thirty (30)
     days, or such longer  period during which  execution of the same shall have
     been stayed,  appeal therefrom and cause the execution thereof to be stayed
     during such appeal.

          11.7.7  Cross-Default to Material Debt.  Failure of Servicer or any of
     its  Subsidiaries  to pay any  Material  Debt when due;  or the  default by
     Servicer  or any of  its  Subsidiaries  in  the  performance  of any  term,
     provision or condition  contained in any agreement under which any Material
     Debt  was  created  or is  governed,  or any  other  event  shall  occur or
     condition  exist,  the effect of which is to cause, or to permit the holder
     or holders of such Material Debt to cause,  such Indebtedness to become due
     prior to its stated  maturity;  or any Material  Debt of Servicer or any of
     its Subsidiaries  shall be declared to be due and payable or required to be
     prepaid (other than by a regularly  scheduled payment or as a result of the
     sale of an asset securing such Material Debt) prior to the stated  maturity
     thereof.

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At any time  during  the  continuance  of any  Servicer  Event of  Default or an
Amortization Event, the Administrative  Agent may, in its sole discretion,  (and
shall,  at the  direction of any  Co-Agent),  notify  Servicer in writing of the
revocation  of  its  appointment  as  Servicer  hereunder.  Upon  revocation  of
Servicer's  appointment  hereunder,  the  Co-Agents  shall  appoint a  successor
Servicer.  Servicer  agrees that upon receipt of written  notification  from the
Administrative  Agent of the  revocation of Servicer's  appointment  as Servicer
hereunder,  Servicer shall upon the written request of the Administrative  Agent
(which request may be contained in the  notification  of revocation)  (i) notify
all Obligors under the  Receivables to make payment thereof to a bank account(s)
or post office box designated by the Administrative  Agent and specified in such
notice, and (ii) pay to the Administrative  Agent (or its designee)  immediately
all Collections  then held or thereafter  received by Servicer or the applicable
Seller of  Receivables,  together  with all  other  payment  obligations  of the
Servicer  hereunder  owing to any of the Lenders,  the LC Issuers or the Agents.
Servicer  shall,  at its sole cost and  expense,  cooperate  with and assist the
successor  Servicer  (including,  without  limitation,  providing access to, and
transferring,  all Receivable Files and all records  (including  data-processing
records)  relating  thereto (which shall be held in trust for the benefit of the
parties hereto in accordance with their respective interests) and, to the extent
permissible,  allowing the successor  Servicer to use all licenses,  hardware or
software necessary or desirable to collect the Receivables) (it being understood
and agreed that Bowater shall use its best efforts to obtain permission for such
successor  Servicer's use of such software).  Bowater  irrevocably agrees to act
(if requested to do so) as the data-processing  agent for the successor Servicer
(in  substantially  the same manner as Bowater  conducted  such  data-processing
functions  while it acted as Servicer).  All costs and expenses  incurred by the
Servicer,  successor Servicer,  the LC Issuers, the Lenders, the Agents or their
respective  counsel in  connection  with any transfer of  servicing  are for the
account of Bowater and Borrower, jointly and severally.

                                  ARTICLE XII.
                                     AGENTS

        Section 12.1      Authorization and Action.

     (a) Each of Three Pillars and STB hereby appoints SunTrust Capital Markets,
Inc. as its Co-Agent for purposes of the  Transaction  Documents and  authorizes
SunTrust  Capital  Markets,  Inc.  in such  capacity  to take such action on its
behalf under each Transaction Document and to exercise such powers hereunder and
thereunder  as are  delegated to SunTrust  Capital  Markets,  Inc., as the Three
Pillars Agent, by the terms hereof and thereof, together with such powers as are
reasonably  incidental  thereto.  Each  of VFCC  and  Wachovia  hereby  appoints
Wachovia  Bank,  National  Association  as  its  Co-Agent  for  purposes  of the
Transaction  Documents and authorizes  Wachovia Bank, National  Association,  in
such capacity to take such action on its behalf under each Transaction  Document
and to  exercise  such powers  hereunder  and  thereunder  as are  delegated  to
Wachovia  Bank,  National  Association,  as VFCC Agent,  by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto.

     (b) Each of the Lenders,  the LC Issuers and the Co-Agents  hereby appoints
SunTrust Capital Markets,  Inc. as its Administrative  Agent for purposes of the
Transaction  Documents and authorizes  SunTrust  Capital  Markets,  Inc. in such
capacity to take such action on its behalf under each  Transaction  Document and
to exercise such powers  hereunder  and

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thereunder as are delegated to SunTrust Capital Markets, Inc., as Administrative
Agent,  by the terms  hereof  and  thereof,  together  with  such  powers as are
reasonably incidental thereto.

     (c)  Notwithstanding  any  provision  to the  contrary  elsewhere  in  this
Agreement, none of the Agents shall have any duties or responsibilities,  except
those expressly set forth in the  Transaction  Documents to which it is a party,
or any  fiduciary  relationship  with any  Lender or LC  Issuer,  and no implied
covenants,  functions,  responsibilities,  duties, obligations or liabilities on
the part of such Agent shall be read into any Transaction  Document or otherwise
exist against such Agent.

     (d) The  provisions  of this  Article XII are solely for the benefit of the
Agents,  the LC Issuers and the  Lenders,  and neither of Borrower  nor Servicer
shall have any rights as a third-party beneficiary or otherwise under any of the
provisions  of this Article  XII,  except that this Article XII shall not affect
any obligations which any of the Agents,  the LC Issuers or the Lenders may have
to either of Borrower or Servicer under the other provisions of this Agreement.

     (e) In performing  its functions and duties  hereunder,  (i) the VFCC Agent
shall  act  solely as the agent of the  members  of the VFCC  Group and does not
assume nor shall be deemed to have assumed any  obligation  or  relationship  of
trust  or  agency  with or for  either  Borrower  or  Servicer  or any of  their
respective successors and assigns, (ii) the Three Pillars Agent shall act solely
as the agent of the members of the Three  Pillars  Group and does not assume nor
shall be deemed to have  assumed  any  obligation  or  relationship  of trust or
agency  with or for  either  Borrower  or  Servicer  or any of their  respective
successors and assigns,  and (iii) the Administrative  Agent shall act solely as
the agent of the Secured Parties and does not assume nor shall be deemed to have
assumed any  obligation  or  relationship  of trust or agency with or for either
Borrower or Servicer or any of their respective successors and assigns.

     Section 12.2  Delegation  of Duties.  Each of the Agents may execute any of
its duties under the Transaction  Documents to which it is a party by or through
agents  or  attorneys-in-fact  and  shall  be  entitled  to  advice  of  counsel
concerning  all matters  pertaining to such duties.  None of the Agents shall be
responsible for the negligence or misconduct of any agents or  attorneys-in-fact
selected by it with reasonable care.

     Section  12.3  Exculpatory  Provisions.  None of the  Agents nor any of its
directors,  officers,  agents or  employees  shall be (i)  liable for any action
lawfully  taken or omitted to be taken by it or them or any Person  described in
Section 12.2 under or in connection  with this Agreement  (except for its, their
or such Person's own bad faith, gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders,  the LC Issuers or other Agents
for any recitals,  statements,  representations  or warranties  made by Borrower
contained in this Agreement or in any  certificate,  report,  statement or other
document  referred to or provided  for in, or  received  under or in  connection
with,  this Agreement or for the value,  validity,  effectiveness,  genuineness,
enforceability or sufficiency of this Agreement or any other document  furnished
in  connection  herewith,  or for any failure of either  Borrower or Servicer to
perform its respective  obligations  hereunder,  or for the  satisfaction of any
condition  specified  in Article  VII,  except  receipt of items  required to be
delivered to such Agent. None of the Agents shall be under any obligation to any
other  Agent or any  Lender or LC Issuer to  ascertain  or to

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inquire  as to the  observance  or  performance  of any  of  the  agreements  or
covenants  contained in, or  conditions  of, this  Agreement,  or to inspect the
properties, books or records of Borrower, Servicer or Sellers. This Section 12.3
is intended  solely to govern the  relationship  between the Agents,  on the one
hand, and the LC Issuers and the Lenders, on the other.

     Section 12.4 Reliance by Agents.

     (a) Each of the Agents shall in all cases be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed,  sent or made by the proper  Person
or Persons and upon advice and statements of legal counsel  (including,  without
limitation,  counsel to the Loan  Parties),  independent  accountants  and other
experts  selected by such Agent.  Each of the Agents shall in all cases be fully
justified in failing or refusing to take any action under this  Agreement or any
other document  furnished in connection  herewith  unless it shall first receive
such  advice  or  concurrence  of such of the  members  of its Group as it shall
determine to be appropriate under the relevant circumstances,  or it shall first
be indemnified to its  satisfaction by its  constituent  Liquidity Banks against
any and all liability, cost and expense which may be incurred by it by reason of
taking or continuing to take any such action.

     (b) Any  action  taken by any of the  Agents  in  accordance  with  Section
12.4(a) shall be binding upon all of the Agents, the LC Issuers and the Lenders.

     Section  12.5 Notice of  Significant  Events.  None of the Agents  shall be
deemed to have knowledge or notice of the occurrence of any Significant Event or
Unmatured  Significant  Event unless such Agent has received notice from another
Agent,  a Lender,  an LC Issuer or a Loan  Party  referring  to this  Agreement,
stating that a  Significant  Event or Unmatured  Significant  Event has occurred
hereunder and describing such Significant Event or Unmatured  Significant Event.
In the event that any of the Agents  receives such a notice,  it shall  promptly
give notice  thereof to the Lenders,  the LC Issuers and the other  Agents.  The
Administrative  Agent shall take such action  with  respect to such  Significant
Event  or  Unmatured  Significant  Event  as  shall  be  directed  by any of the
Co-Agents  provided  that  the  Administrative   Agent  is  indemnified  to  its
satisfaction  by such Co-Agent and its  Constituent  Liquidity Banks against any
and all  liability,  cost and  expense  which may be incurred by it by reason of
taking any such action.

     Section 12.6 Non-Reliance on Other Agents and Lenders.  Each of the Lenders
and LC Issuers expressly  acknowledges  that none of the Agents,  nor any of the
Agents' respective officers, directors, employees, agents,  attorneys-in-fact or
affiliates has made any  representations  or warranties to it and that no act by
any of the Agents hereafter taken, including,  without limitation, any review of
the  affairs  of  the  Loan  Parties,   shall  be  deemed  to   constitute   any
representation  or warranty  by such  Agent.  Each of the Lenders and LC Issuers
also  represents and warrants to the Agents and the other LC Issuers and Lenders
that it has,  independently and without reliance upon any such Person (or any of
their  Affiliates)  and based on such documents and information as it has deemed
appropriate,  made its own  appraisal of and  investigation  into the  business,
operations,   property,   prospects,   financial   and  other   conditions   and
creditworthiness  of the Loan  Parties  and made its own  decision to enter into
this Agreement.

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Each of the Lenders and LC Issuers also represents  that it will,  independently
and without reliance upon the Agents or any other LC Issuer or Lender, and based
on such  documents and  information  as it shall deem  appropriate  at the time,
continue to make its own credit analysis,  appraisals and decisions in taking or
not taking action under this  Agreement,  and to make such  investigation  as it
deems  necessary  to inform  itself as to the  business,  operations,  property,
prospects,  financial  and  other  condition  and  creditworthiness  of the Loan
Parties.   The  Agents,  the  LC  Issuers,  the  Lenders  and  their  respective
Affiliates,  shall have no duty or  responsibility  to provide any party to this
Agreement  with  any  credit  or  other  information  concerning  the  business,
operations,    property,   prospects,   financial   and   other   condition   or
creditworthiness  of the Loan Parties which may come into the possession of such
Person  or  any  of  its  respective  officers,  directors,  employees,  agents,
attorneys-in-fact  or affiliates,  except that each of the Agents shall promptly
distribute  to the other  Agents,  the LC  Issuers  and the  Lenders,  copies of
financial and other information  expressly  provided to it by either Borrower or
Servicer pursuant to this Agreement.

     Section  12.7  Indemnification  of Agents.  Each  Liquidity  Bank agrees to
indemnify (a) its applicable Co-Agent, (b) the Administrative Agent, and (c) the
officers,  directors,  employees,  representatives  and  agents  of  each of the
foregoing (to the extent not reimbursed by the Loan Parties and without limiting
the obligation of the Loan Parties to do so),  ratably in accordance  with their
respective Loans, from and against any and all liabilities, obligations, losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including,  without limitation, the reasonable
fees and disbursements of counsel for such Co-Agent, the Administrative Agent or
such Person in connection  with any  investigative,  administrative  or judicial
proceeding  commenced  or  threatened,  whether  or  not  such  Co-Agent  or the
Administrative  Agent or such Person shall be  designated a party  thereto) that
may at any time be imposed on,  incurred by or asserted  against such  Co-Agent,
the Administrative Agent or such Person as a result of, or arising out of, or in
any  way  related  to or by  reason  of,  any of the  transactions  contemplated
hereunder or the  execution,  delivery or  performance  of this Agreement or any
other  document  furnished  in  connection  herewith  (but  excluding  any  such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or  disbursements  resulting  solely from the bad faith,  gross
negligence or willful misconduct of such Co-Agent,  the Administrative  Agent or
such Person as finally determined by a court of competent jurisdiction).

     Section 12.8 Agents in their Individual  Capacities.  Each of the Agents in
its individual  capacity and its  affiliates may make loans to, accept  deposits
from and  generally  engage in any kind of  business  with the Loan  Parties and
their Affiliates as though such Agent were not an Agent hereunder.  With respect
to its Loans or, solely in the case of Wachovia,  its Letters of Credit, if any,
pursuant to this  Agreement,  each of the Agents  shall have the same rights and
powers under this Agreement as any Lender or LC Issuer and may exercise the same
as though  it were not an Agent,  and the terms  "Lender"  and  "Lenders"  shall
include each of the Agents in their individual capacities.

     Section 12.9 Conflict Waivers.

     (a) STCM and/or STB act(s),  or may in the future act: (i) as administrator
for Three  Pillars,  (ii) an LC Issuer,  (iii) as issuing  and paying  agent for
Three  Pillars'  Commercial

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<PAGE>

Paper  Notes,  (iv) to provide  credit or liquidity  enhancement  for the timely
payment for Three  Pillars'  Commercial  Paper  Notes and (iv) to provide  other
services  from  time to time for  Three  Pillars  (collectively,  the  "SunTrust
Roles").  Without limiting the generality of Sections 12.1 and 12.8, each of the
other Co-Agents, the LC Issuers and the Lenders hereby acknowledges and consents
to any and all SunTrust  Roles and agrees that in  connection  with any SunTrust
Role, STCM and/or STB may take, or refrain from taking,  any action which it, in
its discretion, deems appropriate, including, without limitation, in STCM's role
as  administrator  for Three Pillars,  the giving of notice to the Three Pillars
Liquidity Banks of a mandatory  purchase pursuant to the Three Pillars Liquidity
Agreement,  and hereby  acknowledges  that  neither  STCM,  STB nor any of their
Affiliates  has any fiduciary  duties  hereunder to any Lender (other than Three
Pillars) or LC Issuer arising out of any SunTrust Roles.

     (b) Wachovia acts, or may in the future act: (i) as
administrative agent for VFCC, (ii) an LC Issuer, (iii) as issuing and paying
agent for VFCC's Commercial Paper Notes, (iv) to provide credit or liquidity
enhancement for the timely payment for VFCC's Commercial Paper Notes and (v) to
provide other services from time to time for VFCC (collectively, the "Wachovia
Roles"). Without limiting the generality of Sections 12.1 and 12.8, each of the
Administrative Agent, the LC Issuers and the Lenders hereby acknowledges and
consents to any and all Wachovia Roles and agrees that in connection with any
Wachovia Role, Wachovia may take, or refrain from taking, any action which it,
in its discretion, deems appropriate, including, without limitation, in its role
as administrative agent for VFCC, the giving of notice to the VFCC Liquidity
Banks of a mandatory purchase pursuant to the VFCC Liquidity Agreement, and
hereby acknowledges that neither Wachovia nor any of its Affiliates has any
fiduciary duties hereunder to any Lender (other than VFCC) or other LC Issuer
arising out of any Wachovia Roles.

     Section 12.10 UCC Filings.  Each of the Secured  Parties  hereby  expressly
recognizes  and  agrees  that the  Administrative  Agent  may be  listed  as the
assignee or secured  party of record on the  various UCC filings  required to be
made  under the  Transaction  Documents  in order to  perfect  their  respective
interests  in the  Collateral,  that such  listing  shall be for  administrative
convenience  only in creating a record or nominee holder to take certain actions
hereunder on behalf of the Secured Parties and that such listing will not affect
in any way the status of the  Secured  Parties as the true  parties in  interest
with respect to the Collateral. In addition, such listing shall impose no duties
on  the  Administrative  Agent  other  than  those  expressly  and  specifically
undertaken in accordance with this Article XII.

                                 ARTICLE XIII.
                                   ASSIGNMENTS

     Section 13.1 Restrictions on Assignments.

     (a) Neither Borrower nor Bowater may assign its rights or obligations under
the Transaction Documents to which it is a party or any interest therein without
the prior written  consent of each of the Agents,  except to the  Administrative
Agent for the benefit of the Secured Parties.

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<PAGE>


     (b) Subject to the  provisions  of Sections  6.1 and 13.4,  nothing  herein
shall be deemed to preclude  any Lender from  pledging or  assigning  all or any
portion  of  its  Loans  to  (i)  any  multi-seller   commercial  paper  conduit
administered by a Co-Agent or one of its Affiliates  whose  commercial  paper is
rated at least  A-1 by S&P and P-1 by  Moody's,  or (ii) any  Liquidity  Bank or
other Support Provider (or any successor of any thereof by merger, consolidation
or otherwise) or any Affiliate of the foregoing, in each of the foregoing cases,
which may then  assign all or any portion  thereof so  assigned or any  interest
therein to such party or parties as it may choose.  Each Co-Agent shall promptly
provide notice of any  assignment by any member of its Group to each  applicable
Rating Agency and Borrower.  Subject to Section 13.2, all of the  aforementioned
assignments shall be upon such terms and conditions as the applicable Lender and
its assignee may mutually agree. Upon any assignment  described in clause (i) of
this Section 13.1(b) by a Conduit Lender of all its right, title and interest in
and to the Transaction Documents, all references in the Transaction Documents to
the  assigning  Conduit  Lender  or its  Co-Agent  shall be  deemed to have been
replaced with references to the assignee Conduit Lender and its Co-Agent, and CP
Costs for the assignee's  Group shall be computed with reference to the assignee
Conduit Lender's Commercial Paper Notes.

     Section 13.2  Documentation.  Each Lender shall deliver to each assignee an
assignment, in such form as such Lender and the related assignee may agree, duly
executed  by such  Lender,  assigning  any such Loan to the  assignee,  and such
Lender shall promptly execute and deliver all further instruments and documents,
and take all further action,  that the assignee may reasonably request, in order
to perfect,  protect or more fully  evidence  the  assignee's  right,  title and
interest in and to such Loan,  and to enable the assignee to exercise or enforce
any rights hereunder or under the applicable Lender Note evidencing such Loan.

     Section  13.3 Rights of  Assignees.  Subject to the  provisions  of Section
13.4,  upon the  foreclosure  of any  assignment  of any Loans made for security
purposes,  or upon any other  assignment  of any Loan from a Lender  pursuant to
this Article XIII, the respective  assignee receiving such assignment shall have
all of the rights of a Lender  hereunder to the extent of such  assignment  with
respect to such  Loans and all  references  to a Lender in Section  6.1 shall be
deemed to apply to such assignee to the extent of such assignment.

     Section 13.4 Transfer and  Maintenance  of Register.  Each  Co-Agent  shall
maintain a register  (each, a "Register") on which it will record the Loans made
to Borrower by the member of its Group  hereunder and each  repayment in respect
of the  principal  amount of such Loans.  Each Co-Agent  shall,  upon receipt of
instruments  evidencing  the  transfer  of the rights to the  principal  of, and
interest on, any Loan made by a member of its Group pursuant to this  Agreement,
record such transfer in the Register and such transfer  shall be effective  upon
recordation.  Failure  to  make  any  such  recordation,  or any  error  in such
recordation shall not affect the respective Borrower's obligations in respect of
such Loans.  If any Lender sells  participations  in any Loan, it shall maintain
(or  cause  its  Co-Agent  to   maintain)  a  Register   with  respect  to  such
participations and shall permit the transfer of such  participations only if and
when the  transfer  is  recorded  in the  Register.  Each  Co-Agent  will permit
Borrower to review such  Register as  reasonably  needed for  Borrower to comply
with its  obligations  under  this  Agreement  or under  any  applicable  law or
governmental regulation or procedure.

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<PAGE>


                                  ARTICLE XIV.
                                 INDEMNIFICATION

     Section 14.1 General  Indemnity  of  Borrower.  Without  limiting any other
rights  which  any such  Person  may have  hereunder  or under  applicable  law,
Borrower hereby agrees to indemnify Servicer and each of the Agents, Lenders, LC
Issuers, Support Providers and each of their respective Affiliates,  successors,
transferees, participants and assigns and all officers, directors, shareholders,
controlling  persons,  employees and agents of any of the foregoing (each of the
foregoing Persons being individually called an "Indemnified  Party"),  forthwith
on demand, on an after-tax basis, from and against any and all damages,  losses,
claims,  liabilities  and  related  costs  and  expenses,  including  reasonable
attorneys'  fees and  disbursements  (all of the  foregoing  being  collectively
called "Indemnified Amounts") awarded against or incurred by any of them arising
out of or relating to any Transaction Document or the transactions  contemplated
thereby, any commingling of funds (whether or not permitted  hereunder),  or the
use of proceeds therefrom by Borrower, including (without limitation) in respect
of the funding of any Loan,  the  issuance of any Letter of Credit or in respect
of any Receivable;  excluding,  however, (a) Indemnified Amounts to the extent a
final judgment of a court of competent  jurisdiction holds that such Indemnified
Amounts resulted from gross negligence or willful  misconduct on the part of the
Indemnified  Party  seeking  indemnification  or any  member of its  Group,  (b)
Excluded Taxes, and (c) Indemnified  Amounts arising from an LC Issuer's failure
to pay under any  Letter of  Credit  after the  presentation  to it of a request
strictly complying with the terms of such Letter of Credit.

     Section 14.2 Indemnity of Servicer. Without limiting any other rights which
any such Person may have hereunder or under  applicable  law,  Servicer,  hereby
agrees to indemnify each Indemnified  Party forthwith on demand, on an after-tax
basis,  from and  against any and all  Indemnified  Amounts  awarded  against or
incurred by any of them arising from,  or related to, the  negligence or willful
misconduct  of Servicer,  the  inaccuracy of any  representation  or warranty of
Servicer,  or the  failure of  Servicer  to perform  its  obligations  under any
Transaction Document;  excluding, however, (a) Indemnified Amounts to the extent
determined  by a court of competent  jurisdiction  to have  resulted  from gross
negligence  or willful  misconduct  on the part of any  Indemnified  Party,  (b)
Indemnified Amounts to the extent solely due to non-payment by any Obligor of an
amount due and payable with respect to a Receivable for credit reasons,  and (c)
Excluded  Taxes.  Anything  contained  in  this  Section  14.2  to the  contrary
notwithstanding: (1) the foregoing indemnification is not intended to, and shall
not, constitute a guarantee of the collectibility or payment of the Receivables,
and (2) nothing in this Section 14.2 shall require the Servicer to indemnify any
Indemnified  Party  for  Receivables  which are not  collected,  not paid or are
otherwise  uncollected  on  account  of  the  insolvency,  bankruptcy,  lack  of
creditworthiness or financial inability to pay of the applicable Obligor.

                                   ARTICLE XV.
                                  MISCELLANEOUS

     Section  15.1 No  Waiver;  Remedies.  No  failure on the part of any of the
Indemnified Parties or Affected Parties to exercise, and no delay in exercising,
any right,  power or remedy  hereunder  shall operate as a waiver  thereof;  nor
shall any  single or  partial  exercise  by any of them of any  right,  power or
remedy hereunder preclude any other or further exercise


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<PAGE>

thereof,  or the  exercise of any other  right,  power or remedy.  The  remedies
herein  provided are  cumulative  and not exclusive of any remedies  provided by
law.  Without  limiting the  foregoing,  each of the Committed  Lenders,  the LC
Issuers and the Support  Providers is hereby  authorized by Borrower at any time
and from time to time,  to the fullest  extent  permitted by law, to set off and
apply any and all deposits (general or special,  time or demand,  provisional or
final)  at any  time  held and  other  indebtedness  at any  time  owing by such
Committed  Lender,  LC Issuer or  Support  Provider  to or for the credit or the
account of Borrower,  now or hereafter existing under this Agreement,  to any of
the Agents, Affected Parties, Indemnified Parties or Lenders or their respective
successors and assigns.

     Section 15.2 Amendments,  Etc. No amendment,  modification or waiver of, or
consent  with  respect to, any  provision of this  Agreement  and any  Schedules
hereto shall in any event be  effective  unless the same shall be in writing and
signed and  delivered by (i)  Borrower,  Servicer,  and each of the Agents (with
respect to an  amendment),  or (ii) each of the Agents (with respect to a waiver
or consent by the  Agents,  the LC  Issuers  and the  Lenders)  or  Servicer  or
Borrower (with respect to a waiver or consent by them),  as the case may be, and
then any such waiver or consent shall be effective only in the specific instance
and for the  specific  purpose  for which  given.  Each of the  Co-Agents  shall
provide  each  applicable  Rating  Agency  with a copy of each  amendment  to or
consent or waiver under this  Agreement  promptly  following the effective  date
thereof  if  required  under the  terms of such  Co-Agent's  respective  Conduit
Lender's program documents.

     Section 15.3 Notices,  Etc. All notices and other  communications  provided
for hereunder shall,  unless otherwise stated herein,  be in writing  (including
facsimile  communication) and shall be personally delivered or sent by certified
mail, postage prepaid, or by facsimile,  to the intended party at the address or
facsimile  number of such party set forth  opposite  its name on  Schedule  15.3
hereto or at such other  address or facsimile  number as shall be  designated by
such party in a written notice to the other parties hereto. All such notices and
communications shall be effective,  (a) if personally delivered,  when received,
(b) if sent by certified  mail,  three Business Days after having been deposited
in the mail, postage prepaid, (c) if sent by overnight courier, one Business Day
after having been given to such courier,  and (d) if transmitted by facsimile or
e-mail,  when sent,  receipt confirmed by telephone or electronic means,  except
that notices and  communications  pursuant to Section 2.2 shall not be effective
until received.

     Section  15.4 Costs,  Expenses  and Taxes.  In addition to its  obligations
under Section 14.1, Borrower agrees to pay on demand:


          (a)  except  to the  extent  limited  by  Section  9.1.11  and the Fee
     Letters, all costs and expenses incurred by the Agents, the LC Issuers, the
     Lenders,  the  Liquidity  Banks,  the  Support  Providers  and  Servicer in
     connection with (i) the preparation,  execution,  delivery,  administration
     and  enforcement  of, or any  breach  of, the  Transaction  Documents,  the
     Liquidity Agreements and, to the extent directly related to this Agreement,
     the other Program  Documents  (including any amendments or modifications of
     or  supplements  to  the  Program   Documents   directly  related  to  this
     Agreement), including, without limitation, the reasonable fees and expenses
     of counsel to any of such Persons  incurred in connection


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<PAGE>

     therewith,  (ii) the  perfection  of the  Administrative  Agent's  security
     interest in the Collateral,  (iii) the maintenance of the LockBoxes and the
     LockBox  Accounts,  (iv) the audit of the books,  records and procedures of
     Sellers,  Servicer  and  Borrower  by any  Agent's  auditors  (which may be
     employees  of such  Agent),  and (v)  Rating  Agency  fees  related  to the
     transactions contemplated by this Agreement; and

          (b) all stamp and other transactional or filing taxes and fees payable
     or  determined to be payable in connection  with the  execution,  delivery,
     filing  and  recording  of this  Agreement,  the  Lender  Note,  the  other
     Transaction  Documents,   or  (to  the  extent  directly  related  to  this
     Agreement) the Program Documents,  and agrees to indemnify each Indemnified
     Party against any  liabilities  with respect to or resulting from any delay
     in paying or omission to pay such taxes and fees.

     Section 15.5 Binding Effect; Survival. This Agreement shall be binding upon
and inure to the benefit of Borrower,  the Lenders,  the LC Issuers,  the Agents
and their  respective  successors and assigns,  and the provisions of Article VI
and  Article  XIV shall  inure to the  benefit of the  Affected  Parties and the
Indemnified Parties,  respectively, and their respective successors and assigns;
provided,  however,  nothing in the  foregoing  shall be deemed to authorize any
assignment  not  permitted  by Article  XIII.  This  Agreement  shall create and
constitute the continuing  obligations of the parties hereto in accordance  with
its terms,  and shall remain in full force and effect until such time, after the
Commitment  Termination  Date, when all Obligations  have been finally and fully
paid and  performed.  The rights and remedies  with respect to any breach of any
representation  and  warranty  made by Borrower or Servicer  pursuant to Article
VIII and the  indemnification  and payment provisions of Article XIV and Article
VI,  Sections  15.4,  15.11 and 15.12 shall be continuing  and shall survive any
termination of this Agreement and any termination of Bowater's  rights to act as
Servicer hereunder or under any other Transaction Document.

     Section  15.6  Captions  and  Cross   References.   The  various   captions
(including,  without  limitation,  the table of contents) in this  Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement.  Unless otherwise  indicated,
references in this Agreement to any Section,  Appendix,  Schedule or Exhibit are
to such Section of or Appendix,  Schedule or Exhibit to this  Agreement,  as the
case may be,  and  references  in any  Section,  subsection,  or  clause  to any
subsection,  clause or subclause are to such subsection,  clause or subclause of
such Section, subsection or clause.

     Section  15.7  Severability.  Any  provision  of this  Agreement  which  is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  of this  Agreement  or  affecting  the
validity or enforceability of such provision in any other jurisdiction.

     Section 15.8 Governing  Law. THIS AGREEMENT  SHALL BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAW  PRINCIPLES  THEREOF  (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL  OBLIGATIONS  LAW)  EXCEPT  TO THE  EXTENT  THAT  THE  LAWS  OF

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<PAGE>

     ANOTHER JURISDICTION GOVERN THE PERFECTION,  OR THE EFFECT OF PERFECTION OR
     NONPERFECTION,  OF THE SECURITY INTERESTS OF THE ADMINISTRATIVE  AGENT, FOR
     THE BENEFIT OF THE SECURED PARTIES.

     Section 15.9  Counterparts.  This  Agreement may be executed by the parties
hereto in several counterparts,  each of which shall be deemed to be an original
but all of which shall constitute together but one and the same agreement.

     Section 15.10 Submission to Jurisdiction; Waiver of Trial by Jury.

          (a) Each of Borrower and Servicer  hereby submits to the  nonexclusive
     jurisdiction of any United States District Court for the Southern  District
     of New York and of any New York state court  sitting in New York,  New York
     for purposes of all legal  proceedings  arising out of, or relating to, the
     Transaction  Documents or the transactions  contemplated  thereby.  Each of
     Borrower and Servicer  hereby  irrevocably  waives,  to the fullest  extent
     possible,  any  objection it may now or hereafter  have to the venue of any
     such  proceeding and any claim that any such proceeding has been brought in
     an inconvenient forum. Nothing in this Section 15.10 shall affect the right
     of any of the  Agents,  the LC  Issuers  or  Lenders to bring any action or
     proceeding  against Borrower or Servicer or their respective  properties in
     the courts of other jurisdictions.

          (b) TO THE EXTENT  PERMITTED  BY  APPLICABLE  LAW,  EACH PARTY  HERETO
     IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION,  PROCEEDING OR
     COUNTERCLAIM  ARISING  OUT  OF,  OR IN  CONNECTION  WITH,  ANY  TRANSACTION
     DOCUMENT OR ANY MATTER ARISING THEREUNDER.

     Section 15.11 No Recourse Against Conduit Lenders. The obligations (if any)
of the Conduit Lenders under this Agreement are solely the corporate obligations
of such Conduit Lender. No recourse shall be had for any obligation, covenant or
agreement  (including,  without  limitation,  the payment of any amount owing in
respect to this  Agreement or the payment of any Fee  hereunder or for any other
obligation  or claim)  arising out of or based upon this  Agreement or any other
agreement, instrument or Transaction Document entered into pursuant hereto or in
connection  herewith  against  any  stockholder,  employee,  officer,  director,
manager, administrator,  partner or incorporator of any Conduit Lender, as such,
by the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise.

     Section 15.12 No Proceedings.  Each of the parties hereto hereby agree that
it will not institute  against any Conduit  Lender,  or join any other Person in
instituting against any Conduit Lender, any insolvency  proceeding (namely,  any
proceeding of the type referred to in the  definition of Event of Bankruptcy) so
long as any  Commercial  Paper  Notes  issued by such  Conduit  Lender  shall be
outstanding  and there  shall not have  elapsed  one year plus one day since the
last day on which any such  Commercial  Paper  Notes shall be  outstanding.  The
provisions of this Section 15.12 shall survive the termination hereof.

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<PAGE>


     Section 15.13  Confidentiality.  Each of the Agents, the LC Issuers and the
Lenders will, and will cause its affiliates,  directors, officers, employees and
representatives  to, keep confidential,  and not publish,  disclose or otherwise
divulge  and  use  only  in  connection   with  this  Agreement  any  non-public
information  furnished  to it  by  Bowater,  any  Subsidiary  or  any  of  their
respective  agents in  respect of this  Agreement  that  Bowater  (or such other
Person)  identifies  as being  confidential  at the time it furnishes  the same,
directly or indirectly (collectively, the "Information"),  provided that nothing
herein shall limit the disclosure of the  Information  (i) after the Information
shall have become public (other than through a violation of this Section  15.13,
(ii) to the extent required by statute,  rule,  regulation or judicial  process,
(iii) to counsel for any of the Lenders,  the LC Issuers or the Agents,  (iv) to
bank examiners (or any other regulatory  authority having  jurisdiction over any
Lender,  LC Issuer or Agent),  or to auditors or  accountants,  (v) to any other
Agent, LC Issuer or Lender,  its Support  Providers or Rating Agencies,  (vi) in
connection  with any litigation to which any one or more of the LC Issuers,  the
Lenders or the  Agents is a party,  or in  connection  with the  enforcement  of
rights or remedies  hereunder,  or (vii) to a  subsidiary  or  affiliate of such
Agent,  LC Issuer or Lender;  provided,  further,  that (x) unless  specifically
prohibited by applicable  law or court order,  each Lender,  LC Issuer and Agent
shall, prior to disclosure thereof, notify Bowater of any request for disclosure
of the Information (A) by any Governmental  Authority or representative  thereof
(other than any such request in connection  with an examination of the financial
condition  of such  Lender,  such LC Issuer or such  Agent by such  Governmental
Authority)  or (B)  pursuant  to legal  process  and (y) in no event  shall  any
Lender,  LC Issuer or Agent be obligated  or required to return the  Information
furnished by Bowater.

     Section 15.14 Entire  Agreement.  This Agreement and the other  Transaction
Documents  executed and delivered  herewith  represent the final agreement among
the parties hereto and thereto and may not be contradicted by evidence of prior,
contemporaneous  or  subsequent  oral  agreements  of the parties.  There are no
unwritten oral agreements among the parties.

                      [signature pages begin on next page]


<PAGE>


     IN WITNESS  WHEREOF,  the parties have caused this Agreement to be executed
by their  respective  officers  thereunto duly authorized as of the day and year
first above written.

BOWATER FUNDING INC., AS BORROWER


By:  /s/ William G. Harvey
     ---------------------
Name:  William G. Harvey
Title:  President

BOWATER INCORPORATED, AS INITIAL SERVICER


By:  /s/ William G. Harvey
     ---------------------
Name:  William G. Harvey
Title:  Senior Vice President and Chief Financial Officer


<PAGE>



VARIABLE FUNDING CAPITAL COMPANY LLC, AS A CONDUIT  LENDER

BY:  WACHOVIA BANK, NATIONAL ASSOCIATION, ITS ATTORNEY-IN-FACT


By:  /s/ Douglas R. Wilson, Sr.
     --------------------------
Name:  Douglas R. WIlson, Sr.
Title:  Vice President




WACHOVIA BANK, NATIONAL ASSOCIATION,  AS A COMMITTED LENDER, AS AN LC ISSUER
AND AS VFCC AGENT



By:  /s/ Eero H. Maki
     ----------------
Name:  Eero H. Maki
Title:  Director

Commitment:                $100,000,000



<PAGE>


THREE PILLARS FUNDING LLC (F/K/A THREE PILLARS FUNDING CORPORATION),
AS A CONDUIT  LENDER

By:  /s/ Doris J. Hearn
     ------------------
Name:  Doris J. Hearn
Title:  Vice President


SUNTRUST BANK, AS A COMMITTED  LENDER AND AS AN LC ISSUER



By:  /s/ James R. Bennison
     ---------------------
Name:  James R. Bennison
Title:  Vice President

Commitment:                $100,000,000



SUNTRUST CAPITAL MARKETS, INC., AS THREE PILLARS AGENT AND AS ADMINISTRATIVE
AGENT


By:  /s/ Michael G. Maza
     -------------------
Name:  Michael G. Maza
Title:  Managing Director



<PAGE>

                                                                       Exhibit A

                                BORROWING REQUEST

                                     [Date]

To:     SunTrust Capital Markets, Inc. and
        Wachovia Bank, National Association, as "Co-Agents"

From:   Bowater Funding Inc. ("Borrower")

Re:  Amended and Restated  Loan  Agreement  dated as of December 1, 2005,  among
     Borrower,         Bowater         Incorporated         as         Servicer,
     various  Lenders and  Co-Agents,  and SunTrust  Capital  Markets,  Inc., as
     Administrative              Agent             (the             "Agreement")
     ---------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

A              (i)      Pursuant to Section 2.2 of the Agreement, the
                        undersigned hereby requests an Advance in an aggregate
                        amount equal to the following:

                        of which each Group's Funding Amount will be the
                        following (not less than $1,000,000
                        per Group or a larger integral multiple of $200,000):
                                                                                        $-----------------
               (ii)     The date such Advance is requested is:                          __________________

               (iii)    The requested maturity date of the Related Commercial
                        Paper issued to fund such Advance (other than Pooled
                        Commercial Paper) is:
                                                                                        ------------------
               (iv)     The Credit Exposure under the Agreement, after giving
                        effect to the requested Advance under (i) above, will
                        equal:                                                          $-----------------

               (v) The amount in (iv) above does not exceed the Facility Limit
                        which equals:                                                   $_________________

</TABLE>
B.       As of the date hereof and the date of making of such Advance, each of
         the representations and warranties contained in Article VIII of the
         Agreement shall be true and correct on and as of the date hereof and,
         if applicable, the date of such Advance, and no Significant Event or
         Unmatured Significant Event has occurred and is continuing or shall
         exist after giving effect to the Advance requested hereby.

     Capitalized terms used but not defined herein shall have the meanings given
     to them in the Agreement.

         The undersigned certifies to the accuracy of the foregoing.

                                        BOWATER FUNDING INC.


Date:                                   By:-----------------------------------
                                        Title:


<PAGE>

                                                                       Exhibit B

                                   LENDER NOTE

$___________                                                   December 1, 2005



     FOR VALUE  RECEIVED,  Bowater  Funding  Inc., a Delaware  corporation  (the
"Borrower"),  promises  to  pay  __________________________,   as  agent  and/or
administrator  (the  "Co-Agent"),  or its registered  assigns,  on or before the
Scheduled    Commitment    Termination    Date,    the    principal    sum    of
_________________________  and  no/100  Dollars  ($_________)  or, if less,  the
aggregate unpaid  principal  amount of all Loans shown on the schedule  attached
hereto  (and/or any  continuation  thereof  and/or in the records of the Lender)
made by the Lenders in the  ___________  Group pursuant to that certain  Amended
and Restated Loan  Agreement,  dated as of December 1, 2005  (together  with all
amendments  thereto and  restatements and other  modifications,  if any, thereof
from time to time  thereafter  made,  the  "Loan  Agreement"),  among  Borrower,
Bowater  Incorporated,  as servicer,  various Lenders, LC Issuers and Co-Agents,
and SunTrust Capital Markets, Inc., as Administrative Agent.

     Borrower  also  promises  to pay  interest on the unpaid  principal  amount
hereof  from  time to time  outstanding  from the  date  hereof  until  maturity
(whether by acceleration  or otherwise) and, after maturity,  until paid, at the
rates per annum and on the dates specified in the Loan Agreement.

     Payments of both  principal  and interest are to be made in lawful money of
the United  States of  America in  immediately  available  funds to the  account
designated by the Co-Agent pursuant to the Loan Agreement.

     This  promissory  note is one of the  "Lender  Notes"  referred  to in, and
evidences indebtedness incurred under, the Loan Agreement, and the holder hereof
is entitled to the benefits of the Loan  Agreement,  to which  reference is made
for a  description  of the  security for this Lender Note and for a statement of
the terms and  conditions  on which  Borrower is permitted  and required to make
prepayments and repayments of principal of the indebtedness evidenced hereby and
on which such  indebtedness  may be declared to be immediately  due and payable.
Unless  otherwise  defined,  capitalized  terms used  herein  have the  meanings
provided in the Loan Agreement.  This promissory note amends and restates in its
entirety  that certain  Lender Note dated  December 19, 2002 made by Borrower in
favor of the Co-Agent.

     All parties hereto, whether as makers,  endorsers, or otherwise,  severally
waive presentment for payment, demand, protest and notice of dishonor.

     THIS LENDER NOTE SHALL BE DEEMED TO BE A CONTRACT  MADE UNDER AND  GOVERNED
BY THE INTERNAL  LAWS OF THE STATE OF NEW YORK WITHOUT  REGARD TO ANY  OTHERWISE
APPLICABLE  PRINCIPLES  OF CONFLICTS  OF LAWS (OTHER THAN SECTION  5-1401 OF THE
GENERAL OBLIGATIONS LAW).

                                   BOWATER FUNDING INC.



                                  By
                                       ----------------------------------------
                                  Name:
                                         --------------------------------------
                                  Title:
                                         -------------------------------------

<PAGE>


                              SCHEDULE ATTACHED TO
                      LENDER NOTE DATED DECEMBER 1, 2005 OF
                              BOWATER FUNDING INC.
===============================================================================


<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

         PAYABLE TO THE ORDER OF __________________, AS CO-AGENT
---------------------------------------- -------------------------------------- --------------------------------------
                DATE OF                                AMOUNT OF                              AMOUNT OF
                 LOAN                                    LOAN                                 REPAYMENT
---------------------------------------- -------------------------------------- --------------------------------------

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======================================== ====================================== ======================================
</TABLE>


<PAGE>

                                                                 EXHIBIT C

                             FORM OF MONTHLY REPORT




<PAGE>


















<PAGE>

                                                                   EXHIBIT D

                       FORM OF BORROWING BASE CERTIFICATE





<PAGE>












                                                                      EXHIBIT E
                        [FORM OF] PERFORMANCE UNDERTAKING

                             PERFORMANCE UNDERTAKING

                  THIS PERFORMANCE UNDERTAKING (this "Undertaking"), dated as of
December 1, 2005, is executed by Bowater Incorporated, a Delaware corporation
("Bowater" or the "Performance Guarantor"), in favor of Bowater Funding Inc., a
Delaware corporation (together with its successors and assigns, "Beneficiary").

                                    RECITALS

                  (a) Bowater America Inc., a Delaware corporation ("BAI" and
         together with Bowater, the "Sellers"), have entered into an Amended and
         Restated Receivables Sale Agreement dated as of December 1, 2005 (as
         amended, restated or otherwise modified from time to time, the
         "Receivables Sale Agreement"), with Beneficiary, pursuant to which the
         Sellers have agreed, among other things, to sell or contribute to
         Beneficiary, their existing and future accounts receivable and certain
         related rights.

                  (b) Performance Guarantor owns, directly or indirectly, one
         hundred percent (100%) of the capital stock of BAI and of Beneficiary,
         and each of the foregoing (and accordingly, Performance Guarantor) is
         expected to receive substantial direct and indirect benefits from the
         sale or contribution of receivables to Beneficiary pursuant to the
         Receivable Sale Agreement (which benefits are hereby acknowledged).

                  (c) As an inducement for Beneficiary to acquire accounts
         receivable and related rights from BAI pursuant to the Receivables Sale
         Agreement, Performance Guarantor has agreed to guaranty the due and
         punctual performance by BAI of its respective obligations under the
         Receivables Sale Agreement.

                                    AGREEMENT

     NOW, THEREFORE, Performance Guarantor hereby agrees as follows:

     Section 1. Definitions.

     1.1.  Capitalized  terms used herein and not otherwise defined herein shall
have the respective  meanings assigned thereto in the Receivables Sale Agreement
or, if not defined therein, in the Loan Agreement (hereinafter defined).

     1.2. As used herein:

     "Bankruptcy  Code"  means the  United  States  Bankruptcy  Code,  11 U.S.C.
ss.101, et seq., as amended.


<PAGE>

     "Guaranteed   Obligations"  means,   collectively,   all   representations,
warranties,  covenants,  agreements,  terms,  conditions  and  indemnities to be
performed  and  observed  by BAI  under and  pursuant  to the  Receivables  Sale
Agreement and each other document  executed and delivered by or on behalf of BAI
pursuant thereto, including, without limitation, the due and punctual payment of
all sums which are or may become due and owing by BAI under the Receivables Sale
Agreement,   whether  for  fees,   expenses  (including  counsel  fees),  Seller
Indemnified Amounts or otherwise,  whether upon any termination or for any other
reason.

     "Loan  Agreement"  means that certain  Amended and Restated Loan  Agreement
dated as of December 1, 2005 by and among Beneficiary,  as "Borrower,"  Bowater,
as initial  Servicer,  various Lenders,  LC Issuers and Co-Agents,  and SunTrust
Capital Markets,  Inc., as  "Administrative  Agent," as the same may be amended,
restated or otherwise modified from time to time.

     Section 2. Guaranty of Performance of Guaranteed Obligations.

     2.1. Performance  Guarantor hereby guarantees to Beneficiary,  the full and
punctual  payment and  performance  by BAI of the Guaranteed  Obligations.  This
Undertaking is an absolute,  unconditional  and continuing  guaranty of the full
and punctual  performance by BAI of the Guaranteed  Obligations and is in no way
conditioned upon any requirement  that Beneficiary  first attempt to collect any
amounts owing by BAI to  Beneficiary,  any of the Agents,  LC Issuers or Lenders
from any other Person or resort to any collateral  security,  any balance of any
deposit  account or credit on the books of  Beneficiary,  any of the Agents,  LC
Issuers  or  Lenders  in  favor of BAI or any  other  Person  or other  means of
obtaining  payment.  Should BAI default in the payment or  performance of any of
its Guaranteed Obligations, Beneficiary (or its assigns) may cause the immediate
performance by Performance  Guarantor of such  Guaranteed  Obligations and cause
any  payment  Guaranteed  Obligations  to become  forthwith  due and  payable to
Beneficiary (or its assigns), without demand or notice of any nature (other than
as  expressly  provided  herein),  all of which are hereby  expressly  waived by
Performance Guarantor.

     2.2. Notwithstanding the foregoing,  this Undertaking is not a guarantee of
the collection of any of the Receivables and Performance  Guarantor shall not be
responsible for any Guaranteed  Obligations to the extent the failure to perform
such Guaranteed  Obligations by BAI results from Receivables being uncollectible
on account of the  insolvency,  bankruptcy  or lack of  creditworthiness  of the
related Obligor;  provided that nothing herein shall relieve BAI from performing
in full its  Guaranteed  Obligations  under the  Receivables  Sale  Agreement or
Performance  Guarantor  of its  undertaking  hereunder  with respect to the full
performance of such duties.

     Section 3. Performance  Guarantor's Further Agreements to Pay.  Performance
Guarantor  further agrees, as the principal obligor and not as a guarantor only,
to pay to  Beneficiary  (and  its  assigns),  forthwith  upon  demand  in  funds
immediately  available  to  Beneficiary,   all  reasonable  costs  and  expenses
(including  court costs and reasonable  legal expenses)  incurred or expended by
Beneficiary in connection with  enforcement of this  Undertaking,  together with
interest on amounts  recoverable  under this Undertaking from the time


<PAGE>

when such amounts become due until payment,  at a rate of interest (computed for
the actual  number of days elapsed based on a 360-day year) equal to the Default
Rate (as defined in the Loan Agreement).

         Section 4. Waivers by Performance Guarantor. Performance Guarantor
waives notice of acceptance of this Undertaking, notice of any action taken or
omitted by Beneficiary (or its assigns) in reliance on this Undertaking, and any
requirement that Beneficiary (or its assigns) be diligent or prompt in making
demands under this Undertaking, giving notice of any Termination Event or
Significant Event, other default or omission by BAI or asserting any other
rights of Beneficiary under this Undertaking. Performance Guarantor warrants
that it has adequate means to obtain from BAI, on a continuing basis,
information concerning the financial condition of BAI, and that it is not
relying on Beneficiary to provide such information, now or in the future.
Performance Guarantor also irrevocably waives all defenses that at any time may
be available in respect of the Guaranteed Obligations (i) by virtue of any
statute of limitations, valuation, stay, moratorium law or other similar law now
or hereafter in effect or (ii) that arise under the law of suretyship, including
impairment of collateral. Beneficiary (and its assigns) shall be at liberty,
without giving notice to or obtaining the assent of Performance Guarantor and
without relieving Performance Guarantor of any liability under this Undertaking,
to deal with BAI and with each other party who now is or after the date hereof
becomes liable in any manner for any of the Guaranteed Obligations, in such
manner as Beneficiary in its sole discretion deems fit, and to this end
Performance Guarantor agrees that the validity and enforceability of this
Undertaking, including without limitation, the provisions of Section 7 hereof,
shall not be impaired or affected by any of the following: (a) any extension,
modification or renewal of, or indulgence with respect to, or substitutions for,
the Guaranteed Obligations or any part thereof or any agreement relating thereto
at any time; (b) any failure or omission to enforce any right, power or remedy
with respect to the Guaranteed Obligations or any part thereof or any agreement
relating thereto, or any collateral securing the Guaranteed Obligations or any
part thereof; (c) any waiver of any right, power or remedy or of any Termination
Event, Significant Event, or default with respect to the Guaranteed Obligations
or any part thereof or any agreement relating thereto; (d) any release,
surrender, compromise, settlement, waiver, subordination or modification, with
or without consideration, of any other obligation of any person or entity with
respect to the Guaranteed Obligations or any part thereof, other than release of
the Performance Guarantor; (e) the enforceability or validity of the Guaranteed
Obligations or any part thereof or the genuineness, enforceability or validity
of any agreement relating thereto or with respect to the Guaranteed Obligations
or any part thereof; (f) the application of payments received from any source to
the payment of any payment obligations of BAI or any part thereof or amounts
which are not covered by this Undertaking even though Beneficiary (or its
assigns) might lawfully have elected to apply such payments to any part or all
of the payment obligations of BAI or to amounts which are not covered by this
Undertaking; (g) the existence of any claim, setoff or other rights which
Performance Guarantor may have at any time against BAI in connection herewith or
any unrelated transaction; (h) any assignment or transfer of the Guaranteed
Obligations or any part thereof; or (i) any failure on the part of BAI to
perform or comply with any term of the Receivables Sale Agreement or any other
document executed in connection therewith or delivered thereunder, all whether
or not Performance Guarantor shall have had notice or knowledge of any act or
omission referred to in the foregoing clauses (a) through (i) of this Section 4.
<PAGE>

     Section  5.   Unenforceability  of  Guaranteed   Obligations  Against  BAI.
Notwithstanding  (a) any change in ownership  of BAI or any Event of  Bankruptcy
with  respect  to BAI or any other  change in the legal  status of BAI;  (b) the
change in or the imposition of any law, decree, regulation or other governmental
act  which  does or might  impair,  delay  or in any way  affect  the  validity,
enforceability or the payment when due of the Guaranteed Obligations (unless the
same shall be applicable to the Performance  Guarantor);  (c) the failure of BAI
or  Performance  Guarantor  to maintain in full force,  validity or effect or to
obtain or renew when required all governmental and other approvals,  licenses or
consents  required  in  connection  with  the  Guaranteed  Obligations  or  this
Undertaking,  or to take  any  other  action  required  in  connection  with the
performance of all  obligations  pursuant to the Guaranteed  Obligations or this
Undertaking;  or (d) if any of the moneys included in the Guaranteed Obligations
have become irrecoverable from BAI for any other reason other than final payment
in full of the  payment  obligations  in  accordance  with their terms or lawful
setoff of claims against the Purchasers,  this Undertaking shall nevertheless be
binding on Performance  Guarantor.  This Undertaking shall be in addition to any
other guaranty or other security for the  Guaranteed  Obligations,  and it shall
not be rendered  unenforceable  by the  invalidity of any such other guaranty or
security.  In the event that  acceleration of the time for payment of any of the
Guaranteed   Obligations   is  stayed  upon  the   insolvency,   bankruptcy   or
reorganization  of BAI or for any other  reason  with  respect to BAI,  all such
amounts then due and owing with respect to the Guaranteed  Obligations under the
terms of the  Receivables  Sale Agreement,  or any other  agreement  evidencing,
securing or otherwise  executed in connection  with the Guaranteed  Obligations,
shall be immediately due and payable by Performance Guarantor.

         Section 6. Representations and Warranties. Performance Guarantor hereby
represents and warrants to Beneficiary and its assigns that (a) each of the
representations and warranties made by Performance Guarantor in its capacity as
the initial Servicer under the Loan Agreement is true and correct as of the date
hereof, and (b) this Undertaking has been duly executed and delivered by
Performance Guarantor and constitutes its legally valid and binding obligation,
enforceable against Performance Guarantor in accordance with its terms, except
as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).

     Section 7.  Subrogation;  Subordination.  Notwithstanding  anything  to the
contrary  contained  herein,  until the Guaranteed  Obligations are paid in full
Performance  Guarantor:  (a) will not enforce or otherwise exercise any right of
subrogation to any of the rights of Beneficiary,  any of the Agents,  LC Issuers
or Lenders  against BAI, (b) hereby  waives all rights of  subrogation  (whether
contractual,  under  ss.509  of the  Bankruptcy  Code,  at law or in  equity  or
otherwise)  to the  claims of  Beneficiary,  any of the  Agents,  LC  Issuers or
Lenders against BAI and all contractual,  statutory or legal or equitable rights
of contribution, reimbursement,  indemnification and similar rights and "claims"
(as that term is defined in the  Bankruptcy  Code) which  Performance  Guarantor
might now have or hereafter acquire against BAI that arise from the existence or
performance of Performance Guarantor's obligations hereunder, (c) will not claim
any setoff,  recoupment or counterclaim  against BAI in respect of any liability
of  Performance  Guarantor to BAI and (d) waives any benefit of and any right to
participate in any collateral security which may be held by Beneficiary,  any of
the Agents, LC Issuers or Lenders.
<PAGE>

     Section 8. Termination of Undertaking.  Performance Guarantor's obligations
hereunder  shall  continue in full force and effect  until all  Obligations  are
finally  paid  and  satisfied  in full  and the Loan  Agreement  is  terminated,
provided  that this  Undertaking  shall  continue  to be  effective  or shall be
reinstated,  as the case may be, if at any time payment or other satisfaction of
any of the Guaranteed  Obligations is rescinded or must otherwise be restored or
returned upon the  occurrence of any Event of Bankruptcy  with respect to BAI or
otherwise,  as  though  such  payment  had not been  made or other  satisfaction
occurred,  whether or not  Beneficiary (or its assigns) is in possession of this
Undertaking.  No invalidity,  irregularity or  unenforceability by reason of the
Bankruptcy  Code or any other federal or state  insolvency or other similar law,
or any law or order of any Governmental  Authority thereof purporting to reduce,
amend or otherwise affect the Guaranteed  Obligations shall impair, affect, be a
defense to or claim against the obligations of Performance  Guarantor under this
Undertaking.

     Section  9.  Effect of  Bankruptcy.  This  Undertaking  shall  survive  the
insolvency  of BAI and the  commencement  of any  case  or  proceeding  of by or
against either or both of BAI under the Bankruptcy Code or other federal,  state
or other  applicable  bankruptcy,  insolvency or  reorganization  statutes.  [No
automatic stay under the  Bankruptcy  Code with respect to BAI or other federal,
state or other applicable bankruptcy,  insolvency or reorganization  statutes to
which BAI is subject shall postpone the  obligations  of  Performance  Guarantor
under this Undertaking.]

     Section 10. Setoff.  Regardless of the other means of obtaining  payment of
any of the  Guaranteed  Obligations,  Beneficiary  (and each of its  assigns) is
hereby  authorized  at any  time  and  from  time to  time,  without  notice  to
Performance  Guarantor  (any such notice being  expressly  waived by Performance
Guarantor) and to the fullest extent  permitted by law, to set off and apply any
deposits and other sums against the  obligations of Performance  Guarantor under
this  Undertaking,  whether or not  Beneficiary  (or any such assign) shall have
made any demand under this  Undertaking  and although  such  obligations  may be
contingent or unmatured.

     Section  11.  Taxes.  All  payments  to be  made by  Performance  Guarantor
hereunder  shall be made  free and clear of any  deduction  or  withholding.  If
Performance Guarantor is required by law to make any deduction or withholding on
account of any Taxes  (other than  Excluded  Taxes) or  otherwise  from any such
payment,  the sum due from it in respect of such  payment  shall be increased to
the extent  necessary  to ensure  that,  after the making of such  deduction  or
withholding,  Beneficiary  receive a net sum equal to the sum which  they  would
have received had no deduction or withholding been made.

     Section 12. Further Assurances. Performance Guarantor agrees that it
will from time to time, at the request of Beneficiary (or its assigns), provide
information relating to the business and affairs of Performance Guarantor as
Beneficiary may reasonably request.

     Section 13. Successors and Assigns;  Pledge to  Administrative  Agent. This
Undertaking  shall be binding upon  Performance  Guarantor,  its  successors and
permitted  assigns,  and shall  inure to the  benefit of and be  enforceable  by
Beneficiary and its successors and assigns. Performance Guarantor may not assign
or transfer any of its obligations  hereunder  without the prior written consent
of each of Beneficiary and the Agents. Performance Guarantor hereby acknowledges
that Beneficiary  intends to pledge to the Administrative  Agent for the benefit
of the Secured Parties as part of the Collateral for the  Obligations  under the
Loan  Agreement,  all of


<PAGE>

Beneficiary's existing and future right, title and interest in, to and under the
Receivables  Sale Agreement and this  Undertaking,  and hereby agrees that until
the later to occur of  payment  in full of the  Obligations  and the  Commitment
Termination Date, the Administrative Agent shall have the non-exclusive right to
enforce this Undertaking  against  Performance  Guarantor in Beneficiary's name,
place and stead.

         Section 14. Amendments and Waivers. No amendment or waiver of any
provision of this Undertaking nor consent to any departure by Performance
Guarantor therefrom shall be effective unless the same shall be in writing and
signed by Beneficiary, the Agents and Performance Guarantor. No failure on the
part of Beneficiary to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.

     Section 15.  Notices.  All notices and other  communications  provided  for
hereunder  shall be made in writing and shall be  addressed  as  follows:  if to
Performance  Guarantor,  at the address set forth beneath its signature  hereto,
and if to Beneficiary,  at the address  specified in the Loan  Agreement,  or at
such  other  addresses  as each of  Performance  Guarantor  or  Beneficiary  may
designate in writing to the other. Each such notice or other communication shall
be effective (1) if given by facsimile,  upon the receipt thereof,  (2) if given
by mail, five (5) Business Days after the time such  communication  is deposited
in the mail with first class postage prepaid or (3) if given by any other means,
when received at the address specified in this Section 15.

     Section  16.  GOVERNING  LAW.  THIS  UNDERTAKING   SHALL  BE  CONSTRUED  IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
NEW YORK.

     Section 17.  CONSENT TO  JURISDICTION.  EACH OF  PERFORMANCE  GUARANTOR AND
BENEFICIARY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE  JURISDICTION OF ANY
UNITED  STATES  FEDERAL  OR NEW YORK  STATE  COURT  SITTING  IN THE  BOROUGH  OF
MANHATTAN  IN ANY  ACTION  OR  PROCEEDING  ARISING  OUT OF OR  RELATING  TO THIS
UNDERTAKING,  THE RECEIVABLES  SALE AGREEMENT OR ANY OTHER DOCUMENT  EXECUTED IN
CONNECTION  THEREWITH  OR  DELIVERED  THEREUNDER  AND  EACH  OF THE  PERFORMANCE
GUARANTOR AND BENEFICIARY  HEREBY  IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING  MAY BE HEARD AND  DETERMINED IN ANY SUCH COURT AND
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT,  ACTION OR PROCEEDING  BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM.

     Section 18. Bankruptcy Petition.  Performance  Guarantor hereby agrees that
it will not institute  against any Conduit  Lender,  or join any other Person in
instituting against any Conduit Lender, any insolvency  proceeding (namely,  any
proceeding of the type referred to in the  definition of Event of Bankruptcy) so
long as any  Commercial  Paper  Notes  issued by such  Conduit  Lender  shall be
outstanding  and there  shall not have  elapsed  one year plus one day since

<PAGE>

the last day on which any such Commercial Paper Notes shall be outstanding.  The
provisions of this Section 18 shall survive the termination hereof.

     Section  19.  Miscellaneous.   This  Undertaking   constitutes  the  entire
agreement of Performance Guarantor with respect to the matters set forth herein.
The rights and remedies  herein provided are cumulative and not exclusive of any
remedies  provided by law or any other agreement,  and this Undertaking shall be
in  addition  to any other  guaranty of or  collateral  security  for any of the
Guaranteed Obligations. The provisions of this Undertaking are severable, and in
any action or proceeding  involving any state corporate law, the Bankruptcy Code
or any state bankruptcy,  insolvency,  reorganization or other law affecting the
rights of creditors  generally,  if the  obligations  of  Performance  Guarantor
hereunder  would  otherwise be held or determined  to be  avoidable,  invalid or
unenforceable  on  account of the amount of  Performance  Guarantor's  liability
under  this  Undertaking,  then,  notwithstanding  any other  provision  of this
Undertaking  to the contrary,  the amount of such liability  shall,  without any
further action by Performance Guarantor or Beneficiary, be automatically limited
and reduced to the highest amount that is valid and enforceable as determined in
such  action  or  proceeding.  Any  provisions  of this  Undertaking  which  are
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable  such  provision  in  any  other  jurisdiction.  Unless  otherwise
specified,  references herein to "Section" shall mean a reference to sections of
this  Undertaking.  This  Undertaking  amends and  restates in its  entirety the
Performance Undertaking by Performance Guarantor dated as of December 19, 2002.



                           (Signature pages to follow)


<PAGE>


     IN WITNESS WHEREOF, Performance Guarantor has caused this Undertaking to be
executed and delivered as of the date first above written.

                                            BOWATER INCORPORATED


                                            By: ______________________________
                                            Name: ____________________________
                                            Title: _____________________________

                                            Address for Notices:

                                             Bowater Incorporated
                                             55 East Camperdown Way
                                             Greenville, SC  29602
                                             Attention:       Treasurer
                                             Facsimile:       (864) 282-9219
                                             Telephone:       (864) 282-9413





<PAGE>


                                                                      EXHIBIT F

              [FORM OF] LETTER OF CREDIT REQUEST TRANSMITTAL LETTER


                                     [Date]


To:      [Insert Name and Address of applicable LC Issuer]

Cc:      [Insert Co-Agents' Names and Addresses]


Ladies and Gentlemen:

     Reference is hereby made to the Amended and Restated Loan Agreement,  dated
as of December 1, 2005 (as amended,  restated or otherwise modified from time to
time,  the "Loan  Agreement",  the terms  defined  therein  being used herein as
therein   defined),   among  Bowater   Funding  Inc.,  a  Delaware   corporation
("Borrower"),  Bowater  Incorporated,  as initial  Servicer,  the Lenders and LC
Issuers from time to time party thereto, Wachovia Bank, National Association, as
VFCC Agent,  and SunTrust  Capital  Markets,  Inc.,  as Three  Pillars Agent and
Administrative Agent.

     Pursuant to Section 2.4(a) of the Loan Agreement:

     [Borrower hereby requests that ________________ (the "LC Issuer") issue the
Letter of Credit  described in the enclosed Letter of Credit Request received by
Borrower  from  [insert  applicable  Seller  name]  under the  Receivables  Sale
Agreement on _____________,  20__. In connection therewith, enclosed please find
a duly completed LC Application executed by Borrower].

     [Borrower  hereby  requests  that that  ________________  (the "LC Issuer")
Modify standby letter of credit no. __________ dated ________ and issued for the
benefit of [insert beneficiary's name] as follows: _________________].

     The undersigned hereby certifies that the following  statements are true on
the   date   hereof,   and   will  be  true  on  the   date  of  the   requested
[issuance/Modification] (both before and after giving effect thereto):

     (A) the  representations  and  warranties  contained in Article VIII of the
Loan Agreement will be true and correct as of such requested date as though made
on such date,

     (B) no Significant Event or Unmatured Significant Event has occurred and is
continuing or will result from such Credit Event, and

     (C) after giving  effect to such  requested  Credit  Event,  the  aggregate
Credit  Exposure  will not  exceed  the  lesser  of the  Borrowing  Base and the
Facility Limit.

                                     Very truly yours,

                                     BOWATER FUNDING INC.


                                     By:____________________________________
                                       Title:




[Enclosures]






<PAGE>




                                                                  SCHEDULE 8.12

                         LOCKBOXES AND LOCKBOX ACCOUNTS



Bank of America

         Bowater Funding Inc.
         Account Number 3750202618

         PO Box 100207
         Atlanta, GA  30384

         PO Box 503362
         St. Louis, MO 63150

          PO Box 503393
         St. Louis, MO 63150


Wachovia Bank

         Bowater Funding Inc.
         Account Number 0451023812
         PO Box 75081
         Charlotte, NC  28275

         Bowater Funding Inc.
         Account Number 2345038
         3 Bishopsgate, London  EC2N 3AB


JPMorgan Chase Manhattan Bank

         Bowater Funding Inc.
         ABA 021000021
         Account Number 9102524478   (electronic lockbox)



<PAGE>



                                PROCEDURES REVIEW


                        Report of Independent Accountants



         I. Shall be titled the "Report of Independent Accountants on Agreed
Upon Procedures";

         II. Shall be addressed to Bowater Incorporated, as Servicer and to
SunTrust Capital Markets, Inc. as Administrator, at their respective addresses
set forth on Schedule 15.3 to the Loan Agreement;

         III. The review and subsequent report shall be conducted by Commercial
Lending Consultants, Inc. (or such other firm as may be mutually acceptable to
the Co-Agents);

         IV. The report shall be delivered within forty-five (45) days after an
inspection as permitted in Section 9.1.11 of the Loan Agreement; and

         V. Select a sample of accounts included in the receivable schedule
delivered by Borrower pursuant to the initial funding and perform the following:

              (a)     Account Receivable

(i)  reconciliation  from the A/R aged trial balance to the G/L to the financial
     statements as of most current month end;

(ii) access to summary aged trial balance  reports  September  2002 through most
     current month end and hardcopy and electronic file (Lotus,  Excel, Text, or
     print  files) of the most  current  month end  summary  aged trial  balance
     report, if possible;

(iii) summary  schedule of A/R agings per the A/R trial balance reports by month
     September 2002 through most current month end;

(iv) summary schedule reconciling  beginning A/R to ending A/R per the A/R aging
     system by month for the period  September  2002 through most current  month
     end by major classification (i.e. gross sales, debit memos issued, A/R cash
     received, returns & allowances, cash discounts, bad debt write-offs, volume
     rebates,  credit  memos,  etc)  and  access  to  supporting   data/reports.
     Receivables  balances  should  agree to aging  reports and credits  must be
     segregated from sales;

(v)  schedule of receivables by selling terms as of most current month end;
<PAGE>

(vi) aged  schedule of foreign  receivables  included  in the Trade  Receivables
     Program including selling terms (Letters of Credit,  Site Draft,  etc.) and
     country of origin as of most current  month end.  Segregate the schedule by
     eligible  countries  receivables and ineligible  country  receivables.  For
     eligible country foreign receivables please also provide a breakdown of the
     country balance by foreign currency invoiced;

(vii) aged schedule of inter-company  receivables included in the aged A/R trial
     balance(s) as of most current month end, if any;

(viii) aged schedule of receivables from government  agencies as of most current
     month end, if any;

(ix) schedule of charge-backs  and/or debit memos included in the aged A/R trial
     balance as of most current month end by aging category;

(x)  aged  schedule of bankrupt  customer  receivables  included in the aged A/R
     trial balance as of most current month end, if any;

(xi) aged  schedule of top twenty five  customer A/R balances per the aged trial
     balance at most current month end (Customers  should be grouped by ultimate
     parent including multiple account numbers,  ship to's and subsidiaries,  if
     necessary);

(xii) aged  schedules of all  customers  with more than 35% of their  receivable
     balance more than 60 days past due date as of most current month end;

(xiii) aged schedule of unapplied  credit memos  included in the A/R aging as of
     most current month end;

(xiv) written description of the current status of significant past due accounts
     (> $100,000  more than 60 days past invoice  date) as of most current month
     end;

(xv) schedule of monthly  activity in all accounts  receivable  bad debt reserve
     accounts for the period  September  2002  through  most current  month end.
     Monthly activity should include reserve balances,  write-offs,  provisions,
     recoveries and other reserve adjustments;

(xvi) written  description  of policies and  procedures  for the major  accounts
     receivable functional areas such as credit and collections,  billing, order
     processing,  credit memo authorization,  A/R systems, cash management, etc.
     as available;

(xvii) completion of the CLC A/R questionnaire;
<PAGE>

     (b) General Ledger, Financial Statements

(i) copy of summary general ledger trial balance as of most current month end;

(ii) copy of monthly  financial  statements for most current month end and PYMTD
     2002;

(iii) copy of audited year end 2002 and 2001 financial statements;

(iv) copy of CPA Management Letters for 2002;

     (c) Cash Receipts

(i)  list  of all  bank  accounts  including  bank  name,  account  number,  and
     description of activity (flowchart if available);

(ii) copy of bank reconciliations for all lockbox/depository accounts as of most
     current month end;

(iii) schedule  of monthly  cash  receipts  by  location  received  (lockbox(s),
     corporate offices, etc.) for the last three months;

     (d) Corporate Formality

(i)  provide list of independent  director(s)  for the  receivables  corporation
     (SPE)  including name and  address-Also  include the amount of compensation
     paid or payable to the  director(s)  as well as evidence  that such amounts
     were paid from the receivables corporation;

(ii) copies of the SPE entity's  financial  statements  for the last quarter and
     the prior year end;

(iii) copy of board of director's minutes from SPE board meeting(s);

(iv) copy of SPE entity's  corporate  stationary,  address and telephone number;
     and

(v)  evidence  that the  receivable  aging  reports  clearly  indicate  that the
     receivables included therein have been sold to the SPE.




<PAGE>


                                                                  SCHEDULE 15.3
                                NOTICE ADDRESSES


Borrower:

                  Bowater Funding Inc.
                  55 East Camperdown Way
                  Greenville, SC  29602
                  Attention:        Treasurer
                  Facsimile:        (864) 282-9219
                  Telephone:        (864) 282-9413



Servicer:


                  Bowater Incorporated
                  55 East Camperdown Way
                  Greenville, SC  29602
                  Attention:        Treasurer
                  Facsimile:        (864) 282-9219
                  Telephone:        (864) 282-9413



Administrative Agent and Three Pillars Agent:

                  SunTrust Capital Markets, Inc.
                  26th Floor, MC3950
                  303 Peachtree Street
                  Atlanta, Georgia 30308
                  Attention:        _________________
                  Facsimile:        (404) ____________
                  Telephone:        (404) 588-7607

SunTrust Bank as LC Issuer:


                  SunTrust Bank
                  =================
                  Atlanta, Georgia 30308
                  Attention:        _________________
                  Facsimile:        (404) ____________
                  Telephone:        (404) ______________



<PAGE>




VFCC Agent:

                  Wachovia Bank, National Association
                  191 Peachtree Street, N.E., 22nd Floor
                  GA-8047
                  Atlanta, Georgia  30303
                  Attention:        Eero Maki
                  Facsimile:        (404) 332-5152
                  Telephone:        (404) 332-5275

                  with a copy to:

                  Wachovia Bank, National Association
                  301 S. College Street
                  FLR TRW 9 NC06110
                  Charlotte, NC  28288-0610
                  Attention:        Douglas R. Wilson, Sr.
                  Facsimile:        (704) 383-9579
                  Telephone:        (704) 374-2520


     with a copy (in the case of any  matter  relating  to a  Letter  of  Credit
     issued by Wachovia) to:

                  Wachovia Bank, National Association
                  201 South College Street
                  6th Floor, Mail Code NC 0601
                  Charlotte, NC  28288
                  Attention:        Sherry McInturf, Conduit Operations
                  Facsimile:        (704)  383-6036
                  Phone:            (704) 715-1125


